INTERNATIONAL PAPER CO /NEW/ (IP)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. In addition to historical

consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Forward-Looking Statements.”

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The following generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussion of historical items in 2022, and year-to-year comparisons between 2023 and 2022, can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 16, 2024, under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

EXECUTIVE SUMMARY

Full-year 2024 net earnings attributable to shareholders were $557 million ($1.57 per diluted share) compared with $288 million ($0.82 per diluted share) for full-year 2023.

In 2024, we initiated our strategy to deliver profitable growth as the low-cost, most reliable and innovative sustainable packaging solutions provider for our customers. Through a disciplined 80/20 approach, we restructured our corporate organization, added resources to the business, reduced structural costs through footprint actions and successfully piloted regional box plant optimization. Our earnings stabilized in the fourth quarter 2024 and we intend to accelerate earnings improvement in 2025. Our Go-to-Market value over volume reset was largely complete in 2024 and we expect the final unfavorable impacts to volume to be behind us later in 2025. There was a significant focus throughout 2024 on cost reduction. This included a zero-up approach to the corporate organization, including shifting resources to the business and reducing corporate staffing to the level required as a public company. We expect this to reduce costs by approximately $120 million on a run rate basis. Additionally, we made the challenging decision to close five box plants and our Global Cellulose Fibers Georgetown, South Carolina mill. These actions are expected to remove roughly another $110 million of annual cost on a run rate basis. Mill reliability was an issue in 2024 resulting in elevated costs throughout the year. This presents a significant cost reduction opportunity and we will continue to improve the reliability at our mills and optimize our mill and box system so that we are able to reduce structural costs. Finally, we completed the acquisition of DS Smith on January 31, 2025, creating a global leader in sustainable packaging solutions, focused on the attractive and growing North American and EMEA regions.

Comparing 2024 financial performance to 2023, sales in our North American Industrial Packaging business were relatively flat versus the prior year. This was due in part to higher price and mix driven by favorable prior index movements and the execution of our go-to-market strategy. The improved price and mix was offset by lower volumes as we worked through

customer contract restructuring. This decline was in line with our expectations. Sales in our Global Cellulose Fibers business were lower compared to prior year. This was due to lower price and mix driven by prior index movements. Volume was relatively flat versus 2023. Cost of products sold in our North American Industrial Packaging business was lower versus the prior year in line with lower sales during 2024 along with lower maintenance outage expenses. This was partially offset by higher costs associated with mill reliability issues along with increased input costs on higher recovered fiber costs. Cost of products sold in our Global Cellulose Fibers business was lower versus the prior year in line with lower sales during 2024 along with lower maintenance outage expenses and lower input costs. Cost of products sold includes higher costs associated with mill reliability issues. Selling and administrative expenses were higher in our North American Industrial Packaging and Global Cellulose Fibers businesses primarily driven by higher employee incentive compensation expense. Distribution expenses were lower in both our North American Industrial Packaging and Global Cellulose Fibers businesses primarily driven by lower freight expense on reduced sales.

Looking ahead to the first quarter 2025 in our North American Industrial Packaging business, as compared to the fourth quarter 2024 and without consideration of the DS Smith acquisition, we expect slightly lower price and mix based on lower export pricing observed to date along with an unfavorable seasonal mix impact. Volume is expected to be slightly higher in the first quarter 2025 due to two more shipping days partially offset by the near-term impact of our go-to-market strategy. Operations and costs are expected to increase earnings driven by the benefits of our box plant optimization as well as the non-repeat of the higher incentive compensation costs and other unfavorable items from the fourth quarter 2024. Maintenance outage expense is expected to be marginally lower relative to the fourth quarter 2024. Input costs are expected to be relatively flat as higher energy costs will be offset by lower recovered fiber costs. Finally, in February we announced our plan to close the containerboard mill in Campti, Louisiana with operations expected to cease by March 31, 2025. We estimate that the closure will result in aggregate pre-tax charges of approximately $357 million, including pre-tax noncash asset write-offs of approximately $311 million (of which $276 million is accelerated depreciation), and pre-tax cash severance and other shutdown charges of approximately $46 million. In our Global Cellulose Fibers business, we expect price and mix to be lower due to unfavorable prior index movements. We expect volume to be relatively flat. Operations and costs are expected to increase earnings due to

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improved mill performance and reliability along with the non-repeat of the higher incentive compensation costs and other unfavorable one-time items from the fourth quarter 2024. Maintenance outage expense is expected to decrease earnings while input costs are expected to be stable relative to the fourth quarter 2024.

In closing, we believe 2025 will be a transformational year. During the first few months, we anticipate earnings will continue the stabilization trend we saw in the fourth quarter 2024. As we progress further in the year, we expect our earnings to progressively ramp up as the commercial contract restructuring is completed and the 80/20 initiatives deliver value. We have an ambitious pipeline of capital projects that we predict will facilitate the regional optimization of our box system and deliver profitable market share growth. We believe we are well on our way to building a performance-driven and customer-centric culture. We are confident we have developed the right strategy and a concrete plan that will deliver customer excellence and drive profitable growth. We believe our actions will drive transformational improvements and create significant value for our shareholders.

Acquisition of DS Smith

On January 31, 2025, the Company, through its indirect wholly owned subsidiary, International Paper UK Holdings Limited, completed the closing (the “Closing”) of its previously announced business combination of the entire issued and to be issued ordinary shares of DS Smith plc, a public limited company registered in England and Wales that has since been re-registered as DS Smith Limited, a private limited company (“DS Smith”). The business combination was effected by means of a court-sanctioned scheme of arrangement between DS Smith and shareholders of DS Smith under Part 26 of the UK Companies Act 2006, as amended.

The consummation followed the Company’s April 16, 2024 announcement pursuant to Rule 2.7 of the United Kingdom City Code on Takeovers and Mergers disclosing the terms of the business combination (the “Rule 2.7 Announcement”), pursuant to which, for each ordinary share of DS Smith (the “DS Smith Shares”), DS Smith shareholders would receive 0.1285 of a new share of common stock of the Company, par value $1.00 per share (the “Company Common Stock”), resulting in the issuance of 178,126,631 new shares of Company Common Stock (the “New Company Common Stock”).

On January 24, 2025, the European Commission issued its Phase I clearance of the business combination, conditional on International Paper

entering into commitments to divest its plants in Mortagne, Saint-Amand, and Cabourg (France), Over (Portugal) and Bilbao (Spain). As such, the Company has agreed to divest these locations.

On February 4, 2025, the DS Smith Shares were delisted from the London Stock Exchange (the “LSE”) and the shares of New Company Common Stock began trading on the New York Stock Exchange under the symbol “IP” and the shares of Company Common Stock, including the shares of New Company Common Stock, began trading on the LSE via a secondary listing under the symbol “IPC.”

Reconciliation of Net earnings (loss) to Adjusted operating earnings (loss)

Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures defined as net earnings (loss) (a GAAP measure) excluding discontinued operations, net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and net special items, as described in greater detail below, from net earnings (loss) reported under GAAP. Adjusted Operating Earnings Per Share is calculated by dividing Adjusted Operating Earnings by diluted average shares of common stock outstanding. Management uses these non-GAAP measures to focus on ongoing operations and believes that such non-GAAP measures are useful to investors in assessing the operational performance of the Company and enabling investors to perform meaningful comparisons of past and present consolidated operating results from continuing operations. The Company believes that using these non-GAAP measures, along with the most directly comparable GAAP measures, provides for a more complete analysis of the Company's results of operations.

Non-operating pension expense (income) represents amortization of prior service cost, amortization of actuarial gains/losses, expected return on assets and interest cost. The Company excludes these amounts from our Adjusted Operating Earnings as the Company does not believe these items reflect ongoing operations. These particular pension cost elements are not directly attributable to current employee service. The Company includes service cost in our non-GAAP measure as it is directly attributable to employee service, and the corresponding employees’ other compensation elements, in connection with ongoing operations.

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The following is a reconciliation of Net earnings (loss) to Adjusted operating earnings (loss) on a total basis. Additional detail is provided below regarding the net special items expense (income) referenced in the charts below.

(a) Adjusted operating earnings (non-GAAP), and adjusted operating earnings per share (non-GAAP) for the year ended December 31, 2023, included in this Annual Report on Form 10-K have been adjusted to include the pre-tax charge of $422 million for accelerated depreciation related to mill strategic actions in the year ended December 31, 2023. This charge was previously treated as a special item and excluded from these non-GAAP earnings measures.

(b) Special items for the year ended December 31, 2024 include a tax benefit of $416 million related to internal legal entity restructuring. This amount also includes tax expense of $10 million on the non-operating pension income and a tax benefit of $72 million associated with special items. Special items for the year ended December 31, 2023 includes a tax benefit of $23 million for the settlement of tax audits and tax expense of $4 million related to internal legal entity restructuring. This amount also includes tax benefit of $13 million on the non-operating pension expense and a tax benefit of $36 million associated with special items.

(a) This amount for the three months ended December 31, 2024 includes tax expense of $2 million on the non-operating pension income and a tax benefit of $36 million associated with special items. Special items for the three months ended September 30, 2024 include a tax benefit of $78 million related to internal legal entity restructuring. This amount also includes tax expense of $3 million on the non-operating pension income and a tax benefit of $24 million associated with special items. Special items for the

three months ended December 31, 2023 include tax expense of $4 million related to internal legal entity restructuring. This amount also includes tax benefit of $3 million on the non-operating pension expense and a tax benefit of $30 million associated with special items.

Effects of Net Special Items Expense (Income)

Pre-tax special items included in continuing operations totaling $363 million and $150 million were recorded in 2024 and 2023, respectively. Details of these charges were as follows:

(a) Severance and other closure costs associated with our mill strategic actions recorded in restructuring and other charges, net.

(b) Severance and other costs associated with the Company's 80/20 strategic approach which includes the realignment of resources recorded in restructuring and other charges, net.

(c) Transaction related costs that the Company believes are not reflective of the Company's underlying operations recorded in selling and administrative expenses.

(d) Environmental remediation adjustments associated with remediation work at sites that have been closed/divested that the Company believes are not reflective of the Company's underlying operations recorded in cost of products sold.

(e) The Company's cost for third-party damages associated with a warehouse fire in Morocco recorded in cost of products sold.

(f) Legal reserve adjustment associated with a previously discontinued business recorded in cost of products sold.

(g) Net gains related to the sale of a building at our permanently closed Orange, Texas containerboard mill, miscellaneous land sales and other items that the Company does not believe are reflective of the Company's underlying operations recorded in net (gains) losses on fixed assets.

(h) Settlement associated with an Italian antitrust matter initially recorded as a special item in 2019 recorded in cost of products sold.

(i) Interest income on tax overpayments in prior years associated with the settlement of certain tax audits recorded in interest expense, net.

(j) Revision of severance estimates related to the Company's Build a Better IP initiative recorded in restructuring and other charges, net.

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(k) Other-than-temporary impairment of an equity method investment recorded in equity earnings (loss), net of taxes.

(l) Interest income related to the settlement of the timber monetization restructuring tax matter recorded in interest expense, net.

The following is a reconciliation of Net earnings (loss) to Adjusted operating earnings (loss) on a per share basis.

Cash provided by operations, including discontinued operations, totaled approximately $1.7 billion and $1.8 billion for 2024 and 2023, respectively. The Company generated free cash flow of approximately $757 million in 2024 and $692 million in 2023. Free cash flow is a non-GAAP measure, which equals cash provided by operations less cash invested in capital projects, and the most directly comparable GAAP measure is cash provided by (used for) operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the

business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures.

The following are reconciliations of free cash flow to cash provided by operations:

The non-GAAP financial measures presented in this Annual Report on Form 10-K as referenced above have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies utilize identical calculations, the Company's presentation of non-GAAP measures in this Annual Report on Form 10-K may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company. Investors are cautioned not to place undue reliance on any non-GAAP financial measures used in this Annual Report on Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

International Paper generated $1.7 billion of cash flow from operations for the year ended December 31, 2024, compared with $1.8 billion, including discontinued operations, in 2023. Capital spending for 2024 totaled $921 million, or 71% of depreciation and amortization expense. Our liquidity position remains strong, supported by approximately $1.9 billion of credit facilities.

RESULTS OF OPERATIONS

While the operating results for International Paper’s various business segments are driven by a number of business-specific factors, changes in International Paper’s operating results are closely tied to changes in general economic conditions in North America,

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Europe, Latin America, North Africa and the Middle East.

Factors that impact the demand for our products include industrial non-durable goods production, consumer preferences, consumer spending and movements in currency exchange rates.

Product prices are affected by a variety of factors including general economic trends, inventory levels, currency exchange rate movements and worldwide capacity utilization. In addition to these revenue-related factors, net earnings are impacted by various cost drivers, the more significant of which include changes in raw material costs, principally wood, recovered fiber and chemical costs; energy costs; freight costs; mill outage costs; salary and benefits costs, including pensions; and manufacturing conversion costs.

The following summarizes our results from continuing operations for the year ended December 31, 2024 compared with the year ended December 31, 2023:

TWELVE MONTHS ENDED DECEMBER 31, 2024 COMPARED TO THE TWELVE MONTHS ENDED DECEMBER 31, 2023

The following is a discussion of International Paper’s consolidated results of operations for the year ended December 31, 2024, and the major factors affecting these results compared to 2023.

Refer to the Effects of Net Special Items Expense (Income) section beginning on page 37 for details of net special items expense (income) discussed below.

Net sales

Net sales for the year ended December 31, 2024 decreased by $297 million or 2% compared to the year ended December 31, 2023. The decrease was driven by lower sales volumes partially offset by higher sales prices. International net sales (based on the location of the seller and including U.S. exports) totaled $5.2 billion or 28% of total sales in 2024. This compares with international net sales of $5.3 billion in 2023 or 28% of total sales. Additional details on net sales are provided in the Business Segment Results section below.

Cost of products sold

Compared to the year ended December 31, 2023, cost of products sold for the year ended December 31, 2024 decreased by $253 million or 2%. Net special items includes charges of $77 million and $36 million in the year ended December 31, 2024 and the year ended December 31, 2023, respectively, in cost of products sold. Additionally, there were decreases of $368 million driven by lower sales and lower fuel and packaging expense, partially offset by an increase in raw materials, maintenance and other expenses of $75 million.

Selling and administrative expenses

Compared to the year ended December 31, 2023, selling and administrative expenses for the year ended December 31, 2024 increased by $480 million or 35%. Net special items includes charges of $128 million for the year ended December 31, 2024 in selling and administrative expenses. There were no special items included in selling and administrative expense for the year ended December 31, 2023. The increase in 2024 compared to the 2023 was primarily driven by higher incentive compensation of $325 million.

Depreciation and amortization

Compared to the year ended December 31, 2023, depreciation and amortization for the year ended December 31, 2024 decreased by $127 million or 9%. Depreciation expense includes $233 million and $422 million for the years ended December 31, 2024 and December 31, 2023, respectively, for accelerated depreciation related to mill and other 80/20 strategic actions. The decrease in 2024 compared to 2023 was primarily driven by less accelerated depreciation, partially offset by the write-down of fixed assets for the Ixtac, Mexico box plant fire in 2024.

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Distribution expenses

Compared to the year ended December 31, 2023, distribution expenses for the year ended December 31, 2024 decreased by $100 million or 6%, primarily driven by lower freight expense of $76 million reflecting lower sales volumes.

Taxes other than payroll and income taxes

Compared to the year ended December 31, 2023, taxes other than payroll and income taxes for the year ended December 31, 2024 decreased by $7 million or 5%, primarily driven by lower real estate tax expense of $8 million due to the divestiture of real estate.

Interest expense, net

Compared to the year ended December 31, 2023, interest expense, net for the year ended December 31, 2024 decreased by $23 million or 10%. Net special items includes income of $10 million and $3 million for the years ended December 31, 2024 and December 31, 2023, respectively, in interest expense, net. The decrease in 2024 compared to 2023 was primarily driven by higher interest income of $22 million in 2024.

Income tax provision (benefit)

Refer to Income Taxes section on pages 41 and 42 for discussion on income tax provision (benefit) and income tax rates.

Net earnings (loss) and earnings (loss) from continuing operations

Full year 2024 net earnings totaled $557 million ($1.57 per diluted share), compared with net earnings of $288 million ($0.82 per diluted share) in 2023. Amounts in 2023 include the results of discontinued operations.

Earnings from continuing operations after taxes in 2024 and 2023 were as follows:

(a)Includes $125 million of net special items income and $32 million of non-operating pension income.

(b)Includes $95 million of net special items charges and $41 million of non-operating pension expense.

Compared with 2023, the benefits from higher sales prices net of an unfavorable mix ($163 million), lower maintenance outage costs ($52 million), lower accelerated depreciation expense ($147 million), lower net interest expense ($12 million) and lower tax expense ($41 million) were partially offset by lower sales volumes ($92 million), higher operating costs ($293 million), higher input costs ($54 million) and higher corporate and other costs ($12 million). In addition, 2024 results included lower equity earnings, net of taxes.

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See Business Segment Results on pages 42 through 44 of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the impact of these factors by segment.

DISCONTINUED OPERATIONS

On September 18, 2023, the Company completed the sale of its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment is no longer a separate reportable industry segment. This transaction is discussed further in Note 10 - Equity Method Investments on page 75 of Item 8. Financial Statements and Supplementary Data for further discussion.

Discontinued operations include the equity earnings of the prior Ilim joint venture. Discontinued operations also includes after-tax losses of $126 million in 2023 for impairment and transaction costs related to our former equity method investment in the Ilim joint venture.

INCOME TAXES

The following is a reconciliation of the net income tax provision (benefit) to the operational income tax provision and the reported effective income tax rate to the operational effective income tax rate:

A net income tax benefit from continuing operations of $415 million was recorded for 2024 and the reported effective income tax rate was (282)%. This includes a tax benefit of $416 million related to internal legal entity restructuring. Excluding this item, a $72 million net tax benefit for other special items and a $10 million tax expense related to non-operating pension expense, the operational tax provision (non-GAAP) for 2024 was $63 million, or 13% of pre-tax earnings before equity earnings.

A net income tax provision from continuing operations of $59 million was recorded for 2023 and the reported effective income tax rate was 15%. This includes a tax benefit of $23 million related to the settlement of tax audits and tax expense of $4 million related to internal legal entity restructuring. Excluding these items, a $36 million net tax benefit for other special items and a $13 million tax benefit related to non-operating pension income, the operational tax

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provision (non-GAAP) for 2023 was $127 million, or 22% of pre-tax earnings before equity earnings.

The operational income tax provision and operational effective income tax rate are non-GAAP financial measures and are calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items and non-operating pension expense (income). The most directly comparable GAAP measures are the reported income tax provision and effective income tax rate, respectively. Management believes that this presentation provides useful information to investors by providing a meaningful comparison of the income tax rate between past and present periods.

DESCRIPTION OF BUSINESS SEGMENTS

International Paper’s business segments discussed below are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the forest products industry.

INDUSTRIAL PACKAGING

The majority of our business is focused on creating fiber-based packaging that protects and promotes goods, enables worldwide commerce and helps keep consumers safe. We meet our customers’ most challenging sales, shipping, storage and display requirements with sustainable solutions. Our U.S. production capacity is approximately 13 million tons annually.

Containerboard includes linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. Approximately 75% of our production is converted into corrugated packaging and other packaging by our 168 North American corrugated packaging plants. Additionally, we recycle approximately one million tons of OCC and mixed and white paper through our 16 U.S. recycling plants. Our corrugated packaging plants are supported by regional design centers, which offer total packaging solutions and supply chain initiatives. In EMEA, our operations include one recycled fiber containerboard mill in Morocco and one in Spain and 23 corrugated packaging plants in France, Italy, Spain, Morocco and Portugal.

GLOBAL CELLULOSE FIBERS

Cellulose fibers are a sustainable, renewable raw material used in a variety of products people depend on every day. We create safe, quality pulp for a wide range of applications like diapers, towel and tissue products, feminine care, incontinence and other

personal care products that promote health and wellness. In addition, our innovative specialty pulps serve as a sustainable raw material used in textiles, construction materials, paints, coatings and more. Our products are made in the United States and Canada and sold around the world. International Paper facilities have annual dried pulp capacity of about 3 million metric tons.

BUSINESS SEGMENT RESULTS

The Company currently operates in two segments: Industrial Packaging and Global Cellulose Fibers. On September 18, 2023, the Company completed the sale of its Ilim equity investment and, as a result, all historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment is no longer a separate reportable segment.

The following tables present net sales and business segment operating profit (loss), which is the Company's measure of segment profitability. Business segment operating profit (loss) is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280 - "Segment Reporting". During 2024, business segment operating profits (losses) used by the chief operating decision maker were adjusted to include accelerated depreciation as part of the measure of business performance. As such, results for the year ended December 31, 2023 have been recast to reflect $422 million for accelerated depreciation related to mill strategic actions in business segment operating profit (losses). For additional information regarding business segment operating profit (loss), including a description of the manner in which business segment operating profit (loss) is calculated, see Note 20 - Financial Information by Business Segment starting on page 95 of Item 8. Financial Statements and Supplementary Data.

INDUSTRIAL PACKAGING

Demand for Industrial Packaging products is closely correlated with non-durable industrial goods production, as well as with demand for e-commerce, processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major factors affecting the profitability of Industrial Packaging are raw material and energy costs, freight costs, mill outage costs, manufacturing efficiency and product mix.

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Industrial Packaging net sales for 2024 decreased to $15.5 billion compared with $15.6 billion in 2023. Operating profits in 2024 were 3% higher than in 2023. Comparing 2024 with 2023, benefits from higher sales prices net of an unfavorable mix ($310 million), lower maintenance outage costs ($17 million) and lower accelerated depreciation expense ($336 million) were partially offset by lower sales volumes ($128 million), higher operating costs ($390 million) and higher input costs ($113 million).

(a) Includes intra-segment sales of $114 million for 2024 and $95 million for 2023.

North American Packaging Solutions' net sales were flat as the benefits of higher prices for both containerboard and corrugated boxes were offset by an unfavorable geographic mix and lower sales volumes. Sales volumes decreased in 2024 compared with 2023 for corrugated boxes reflecting the impact of our box go-to-market strategy. Total maintenance and economic downtime was about 1.2 million short tons lower in 2024 compared with 2023, primarily due to economic downtime that was favorably impacted by the mill strategic actions taken in the fourth quarter of 2023. Cost of products sold decreased by $53 million and was impacted by higher operating costs, lower planned maintenance downtime costs and higher input costs. Operating costs were higher primarily due to increased costs on materials and services, increased spending on maintenance and reliability and higher employee benefits costs, partially offset by lower economic downtime. Input costs were higher, driven by higher recovered fiber costs, partially offset by lower energy, freight and wood costs. Selling and administrative expenses were $347 million higher due to higher incentive compensation expense. Distribution costs were $64 million lower driven by lower sales volumes.

Looking ahead to the first quarter of 2025, compared with the fourth quarter of 2024, sales volumes for corrugated boxes are expected to be higher. Average sales margins are expected to be lower. Operating costs are expected to be lower. Planned maintenance downtime costs are expected to be lower. Input costs are expected to be lower, primarily for recovered fiber.

EMEA Industrial Packaging's net sales were lower in 2024 than in 2023 reflecting lower average sales prices partially offset by a favorable product mix and higher sales volumes. Cost of products sold decreased $55 million and was impacted by higher operating costs, higher planned maintenance downtime costs and lower input costs. Operating costs were negatively impacted by a warehouse fire in Morocco and higher administrative spend. Input costs were lower in 2024, driven by energy and chemical costs mostly offset by higher purchased pulp costs. Input costs benefited from an energy subsidy in both 2024 and 2023. Selling and administrative expenses were $26 million higher driven by incentive compensation expense. Distribution expenses were flat.

Entering the first quarter of 2025, compared with the fourth quarter of 2024, sales volumes are expected to be stable. Average sales margins are expected to be lower, reflecting higher containerboard costs. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be lower. Other input costs are expected to be lower. Earnings will be impacted by the non-repeat of an energy subsidy received in the fourth quarter 2024.

GLOBAL CELLULOSE FIBERS

Demand for Cellulose Fibers products is closely correlated with changes in demand for absorbent hygiene products, primarily driven by the demographics and income growth in various geographic regions. It is further affected by changes in currency rates that can benefit or hurt producers in different geographic regions. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs, and freight costs.

Global Cellulose Fibers net sales for 2024 decreased 3% to $2.8 billion, compared with $2.9 billion in 2023. Operating profits in 2024 decreased compared to 2023. Comparing 2024 with 2023, benefits from higher sales volumes ($9 million), lower operating costs ($11 million), lower planned maintenance outage costs ($50 million) and lower input costs ($43 million) were more than offset by lower average sales price net of a favorable mix

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($100 million) and higher accelerated depreciation expense ($147 million).

Net sales in 2024 compared with 2023 were lower, driven by lower average sales prices. Total maintenance and economic downtime was about 535,000 short tons lower in 2024 compared with 2023, due to both economic and maintenance downtime. Economic downtime was impacted by the mill strategic actions taken in the second half of 2023 and the fourth quarter of 2024. Cost of products sold decreased by $138 million and was impacted by higher operating costs, lower planned downtime costs and lower input costs. Operating costs increased, driven by higher costs on materials and services and reliability incidents. Input costs were lower, driven by energy, chemicals, freight and wood. Selling and administrative expenses increased $51 million driven by higher incentive compensation expense. Distribution costs were lower by $40 million.

Entering the first quarter of 2025, compared with the fourth quarter of 2024, sales volumes are expected to be stable. Average sales margins are expected to be lower. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be higher than in the fourth quarter of 2024. Input costs are expected to be stable. Operating profit will benefit from the non-repeat of accelerated depreciation expense in the fourth quarter of 2024.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

A major factor in International Paper’s liquidity and capital resource planning is generation of operating cash flow, which is highly sensitive to changes in the pricing and demand for our major products. While changes in key operating cash costs, such as raw material, energy, mill outage and distribution, have an effect on operating cash generation, we believe our focus on commercial and operational excellence, as well as our ability to tightly manage costs and working capital has improved our cash flow generation over an operating cycle.

Use of cash during 2024 was primarily focused on working capital requirements, capital spending and returning cash to shareholders through dividends.

CASH PROVIDED BY OPERATING ACTIVITIES

Cash provided by operations, including discontinued operations, totaled $1.7 billion in 2024, compared with $1.8 billion for 2023. Cash used by working capital components (accounts receivable, contract assets and inventory less accounts payable and accrued liabilities, interest payable and other) totaled $10 million in 2024, compared with cash used by

working capital components of $2 million in 2023. Cash dividends received from equity investments were $13 million in 2023. There were no cash dividends received from equity method investments in 2024. The change in cash provided by operations in 2024 compared to the 2023 period was primarily due to lower accounts receivable cash receipts due to the timing of sales, partially offset by higher incentive compensation.

INVESTMENT ACTIVITIES

Cash used for investment activities totaled $808 million in 2024 compared with $668 million in 2023. The increase in cash used for investment activities in 2024 compared to 2023 is mainly due to proceeds from sales of equity method investments of $472 million received in 2023. Additionally, 2024 includes lower capital spending and proceeds from insurance recoveries and the sale of fixed assets.

Capital spending was $921 million in 2024, or 71% of depreciation and amortization, compared with $1.1 billion in 2023, or 80% of depreciation and amortization. Capital spending as a percentage of depreciation and amortization was impacted by accelerated depreciation of $233 million and $422 million for the years ended December 31, 2024 and December 31, 2023, respectively, related to mill strategic actions and other 80/20 strategic actions.

The following table shows capital spending by business segment for the years ended December 31, 2024 and 2023:

Acquisitions

See Note 7 Acquisitions on page 72 of Item 8. Financial Statements and Supplementary Data for a discussion of the Company's acquisitions.

FINANCING ACTIVITIES

Financing activities during 2024 included debt issuances of $102 million and reductions of $141 million for a net decrease of $39 million. Financing activities during 2023 included debt issuances of $783 million and reductions of $780 million.

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There were no early debt extinguishments during the years ended December 31, 2024 and December 31, 2023.

Other financing activities during 2024 included the net issuance of approximately 2.0 million shares of treasury stock, while repurchases of common stock and payments of restricted stock withholding taxes totaled $23 million. During the year ended December 31, 2024, the Company did not repurchase any shares of common stock under our share repurchase program. Through December 31, 2024, the Company had repurchased 119.8 million shares at an average price of $46.23, for a total of approximately $5.5 billion, since the repurchase program began in September 2013. The Company paid cash dividends totaling $643 million during 2024.

Other financing activities during 2023 included the net issuance of approximately 1.6 million shares of treasury stock. Repurchases of common stock and payments of restricted stock withholding taxes totaled $218 million, including $197 million related to shares repurchased under the Company's share repurchase program. The Company paid cash dividends totaling $642 million during 2023.

Interest Rate Swaps

Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk, International Paper utilizes interest rate swaps to change the mix of fixed and variable rate debt. During 2020, International Paper terminated its interest rate swaps with a notional amount of $700 million and maturities ranging from 2024 to 2026 with an approximate fair value of $85 million. Subsequent to the termination of the interest rate swaps, the fair value basis adjustment is amortized to earnings as interest income over the same period as a debt premium on the previously hedged debt. The Company had no outstanding interest rate swaps for the years ended December 31, 2024 and 2023.

Variable Interest Entities

Information concerning variable interest entities is set forth in Note 14 Variable Interest Entities on pages 83 and 84 of Item 8. Financial Statements and Supplementary Data. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 (the "2015 Financing Entities") when the installment notes and third-party loans were extended. The 2015 Financing Entities held installment notes of $4.8 billion and third-party loans

of $4.2 billion which both matured in August 2021. We settled the third-party loans at their maturity with the proceeds from the installment notes. This resulted in cash proceeds of approximately $630 million representing our equity in the 2015 Financing Entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021. On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the 2015 Financing Entities timber monetization restructuring tax matter. Under this agreement, the Company agreed to fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest was charged upon closing of the audit. The amount of interest expense recognized in 2022 was $58 million. As of December 31, 2023, $252 million in U.S. federal income taxes and $58 million in interest expense have been paid as a result of the settlement agreement. The Company has now fully satisfied the payment terms of the settlement agreement regarding the 2015 Financing Entities timber monetization restructuring tax matter. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was recognized as a one-time tax benefit in the third quarter of 2022.

LIQUIDITY AND CAPITAL RESOURCES OUTLOOK FOR 2025

We intend to continue making choices for the use of cash that are consistent with our capital allocation framework to drive long-term value creation. These include maintaining a strong balance sheet and investment grade credit rating, and creating value with a continued focus on cost reduction and making organic investments to maintain our world-class system and strengthen our businesses.

On October 11, 2022, our Board of Directors approved an additional $1.5 billion under our share repurchase program. This program does not have an expiration date and has approximately $2.96 billion aggregate amount of shares of common stock remaining authorized for purchase as of December 31, 2024. We may repurchase shares under such authorization in open market transactions (including block trades), privately negotiated transactions or otherwise, subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. In addition, we have paid regular quarterly cash dividends and expect to continue to pay regular quarterly cash dividends in the foreseeable future. Each quarterly dividend is subject to review and approval by our Board of Directors.

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Capital Expenditures and Long-Term Debt

Capital spending for 2025 is planned at approximately $1.2 billion, or about 117% of depreciation and amortization.

At December 31, 2024, International Paper’s credit agreements totaled $1.9 billion, which is comprised of the $1.4 billion contractually committed bank credit agreement and up to $500 million under the receivables securitization program. In June 2023, the Company amended and restated its credit agreement to, among other things (i) reduce the size of the contractually committed bank facility from $1.5 billion to $1.4 billion, (ii) extend the maturity date from June 2026 to June 2028, and (iii) replace the LIBOR-based rate with a SOFR-based rate. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. At December 31, 2024, the Company had no borrowings outstanding under the $1.4 billion credit agreement or the $500 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed on pages 84 and 85 in Note 15 - Debt and Lines of Credit of Item 8. Financial Statements and Supplementary Data, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at December 31, 2024 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.

In addition to the $1.9 billion capacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 billion supported by its $1.4 billion credit agreement. Under the terms of the Company's commercial paper program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. The Company had no borrowings outstanding as of December 31, 2024 and December 31, 2023 under this program.

During the year ended December 31, 2024, the Company had debt reductions of $141 million in 2024, related primarily to $14 million of capital leases and $127 million of environmental development bonds ("EDB"). In addition, during the year ended

December 31, 2024, the Company also had debt issuances of $102 million of EDBs.

For additional information regarding the Company’s credit agreements and outstanding indebtedness, see Note 15 Debt and Lines of Credit on pages 84 and 85 of Item 8. Financial Statements and Supplementary Data.

International Paper expects to be able to meet projected capital expenditures, service existing debt, meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months and for the foreseeable future thereafter with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and maintain appropriate levels of liquidity to meet our needs while managing balance sheet debt and interest expense. We have repurchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt (including through open market purchases, privately negotiated transactions or otherwise) to the extent consistent with this capital structure planning, and subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors.

Maintaining an investment grade credit rating is an important element of International Paper’s financing strategy. At December 31, 2024, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively.

Contractual obligations for future payments under existing debt and lease commitments and purchase obligations at December 31, 2024, were as follows:

(a)Includes financing lease obligations.

(b)Includes $3.2 billion relating to fiber supply agreements.

(c)Not included in the above table due to the uncertainty of the amount and timing of the payment are unrecognized tax benefits of approximately $199 million. Also not included in

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the above table is $67 million of Deemed Repatriation Transition Tax associated with the 2017 Tax Cuts and Jobs Act which will be settled from 2025 - 2026. Additionally, the deferred tax liability of $486 million related to the Temple-Inland timber monetization is not included in the table above. It will be settled with the maturity of the notes in 2027.

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2024, to be permanently reinvested and, accordingly, no U.S. income taxes have been provided thereon (see Note 12 Income Taxes on pages 77 through 79 of Item 8. Financial Statements and Supplementary Data). We do not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Pension Obligations and Funding

At December 31, 2024, the projected benefit obligation for the Company’s U.S. defined benefit plans determined under U.S. GAAP was approximately $156 million higher than the fair value of plan assets, excluding non-U.S. plans. Plans that are subject to minimum funding requirements had plan assets of $92 million higher than the projected benefit obligation. Under current IRS funding rules, the calculation of minimum funding requirements differs from the calculation of the present value of plan benefits (the "projected benefit obligation") for accounting purposes. Funding contributions depend on the funding methods selected by the Company. The selected methods allow for the smoothing of asset values and interest rates used to measure the funding obligations. The Company continually reassesses the amount and timing of any discretionary contributions and elected not to make any voluntary contributions in 2022, 2023 or 2024. At this time, we do not expect to have any required contributions to our plans in 2025, although the Company may elect to make future voluntary contributions. The timing and amount of future contributions, which could be material, will depend on a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require subjective judgments about matters that are inherently uncertain.

Accounting policies whose application has had or is reasonably likely to have a material impact on the reported results of operations and financial position of International Paper, and that can require a significant level of estimation or uncertainty by management that affect their application, include the accounting for contingencies, impairment or disposal of long-lived assets and goodwill, pensions and income taxes. Management has discussed the selection of critical accounting policies and the effect of significant estimates with the Audit and Finance Committee of the Company’s Board of Directors and with its independent registered public accounting firm.

CONTINGENT LIABILITIES

Accruals for contingent liabilities, including personal injury, product liability, environmental, asbestos and other legal matters, are recorded when it is probable that a liability has been incurred or an asset impaired and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical litigation and settlement experience and recommendations of legal counsel and, if applicable, other experts. Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. The Company estimated the probable liability associated with environmental matters to be approximately $279 million and $251 million in the aggregate as of December 31, 2024 and 2023, respectively. Liabilities for asbestos-related matters require reviews of recent and historical claims data. The Company's total recorded liability with respect to pending and future asbestos-related claims was $100 million and $97 million, net of estimated insurance recoveries, as of December 31, 2024 and 2023, respectively. The Company utilizes its in-house legal counsel and environmental experts to develop estimates of its legal, environmental and asbestos obligations, supplemented as needed by third-party specialists to analyze its most complex contingent liabilities.

IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed by comparing the undiscounted cash flows to carrying value of the assets. If the carrying amount is less than the undiscounted cash flows, the fair value of the assets is compared to the carrying value to determine if they are impaired. An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value.

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We perform an annual goodwill impairment as of October 1. Additionally, interim assessments of possible impairments of goodwill are also made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. A goodwill impairment exists when the carrying amount of goodwill exceeds its fair value.

The amount and timing of goodwill and long-lived asset impairment charges based on these assessments requires the estimation of future cash flows or the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes, operating, raw material, energy and freight costs, various other projected operating economic factors and other intended uses of the assets.

ASU 2011-08, "Intangibles - Goodwill and Other," allows entities testing goodwill for impairment the option of performing a qualitative assessment before performing the quantitative goodwill impairment test. If a qualitative assessment is performed, an entity is not required to perform the quantitative goodwill impairment test unless the entity determines that, based on that qualitative assessment, it is more likely than not that its fair value is less than its carrying value.

The North America Industrial Packaging reporting unit is the Company’s only reporting unit with goodwill. As of October 1, 2024, we performed our annual goodwill impairment test for this reporting unit through a quantitative goodwill impairment test. For the 2024 quantitative assessment, the estimated fair value of the reporting unit was calculated using a weighted approach based on discounted future cash flows, market multiples and transaction multiples. The determination of fair value using the discounted cash flow approach requires management to make significant estimates and assumptions including forecasts of revenues, operating profit margins, and discount rates. The determination of fair value using market multiples and transaction multiples requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiples. The results of our quantitative goodwill impairment test indicated that the carrying amount did not exceed the estimated fair value of the North America Industrial Packaging reporting unit.

PENSION BENEFIT OBLIGATIONS

The calculation of the pension benefit obligation and corresponding expense amounts are determined annually, with involvement of International Paper’s consulting actuary, and are dependent upon various assumptions including the expected long-term rate of return on plan assets, discount rates, projected future compensation increases and mortality rates.

The calculations of pension benefit obligations and expense require decisions about a number of key assumptions that can significantly affect liability and expense amounts, including the expected long-term rate of return on plan assets and the discount rate used to calculate plan liabilities.

Benefit obligations and fair values of plan assets as of December 31, 2024, for International Paper’s pension plan were as follows:

The table below shows the discount rate used by International Paper to calculate U.S. pension obligations for the years shown:

International Paper determines the actuarial assumptions to calculate liability information as of December 31 each year or more frequently if required and pension expense for the following year. International Paper consults with our third-party actuary in determining these actuarial assumptions. The expected long-term rate of return on plan assets is based on projected rates of return for current asset classes in the plan’s investment portfolio. The discount rate assumption was determined based on a hypothetical settlement portfolio selected from a universe of high-quality corporate bonds.

The expected long-term rate of return on U.S. pension plan assets used to determine net periodic cost for the year ended December 31, 2024 was 7.00%.

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Increasing the expected long-term rate of return on U.S. plan assets by an additional 0.25% would decrease 2025 pension expense by approximately $20 million, while a (decrease) increase of 0.25% in the discount rate would (increase) decrease pension expense by approximately $14 million.

Actual rates of return earned on U.S. pension plan assets for each of the last 10 years were:

ASC 715, “Compensation – Retirement Benefits,” provides for delayed recognition of actuarial gains and losses, including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the assumed discount rate, differences between the actual and expected return on plan assets, and other assumption changes. These net gains and losses are recognized in pension expense prospectively over a period that approximates the average remaining service period of active employees expected to receive benefits under the plans to the extent that they are not offset by gains and losses in subsequent years.

Net periodic pension plan expenses, calculated for all of International Paper’s plans, were as follows:

The decrease in 2024 pension expense primarily reflects higher asset returns, lower interest cost due to a lower discount rate, and lower actuarial loss.

Assuming that discount rates, expected long-term returns on plan assets and rates of future compensation increases remain the same as of December 31, 2024, projected future net periodic pension plan expense (income) would be as follows:

The Company estimates that it will record net pension expense of approximately $36 million for its U.S. defined benefit plans in 2025, compared to expense of $1 million in 2024.

The market value of plan assets for International Paper’s U.S. qualified pension plan at December 31, 2024 totaled approximately $8.2 billion, consisting of approximately 62% hedging assets and 38% return seeking assets. The Company’s funding policy for its qualified pension plan is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions and could elect to make voluntary contributions in the future. There were no required contributions to the U.S. qualified plan in 2024. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $23 million for the year ended December 31, 2024.

INCOME TAXES

International Paper records its global tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering technical merits of the position based on specific tax regulations and facts of each matter. Changes to recorded liabilities are only made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases that are relevant to the matter. Accrued interest related to these uncertain tax positions is recorded in our consolidated statement of operations in Interest expense, net. The Company's uncertain tax positions were $204 million and $173 million at December 31, 2024 and 2023, respectively.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in assessing the need for and magnitude of appropriate valuation allowances against deferred tax assets. This assessment is completed by tax jurisdiction and relies on both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative reported pre-tax income is considered objectively verifiable positive

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evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. The Company's valuation allowance was $1.2 billion and $848 million at December 31, 2024 and 2023, respectively.

While International Paper believes that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.

LEGAL PROCEEDINGS

Information concerning certain legal proceedings involving the Company is set forth on pages 79 through 83 of Item  8. Financial Statements and Supplementary Data, which is incorporated by reference herein. Except as set forth in Note 13 Commitments and Contingent Liabilities, the Company is not subject to any administrative or judicial proceeding arising under any federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

RECENT ACCOUNTING DEVELOPMENTS

See Note 2 Recent Accounting Developments starting on page 66 of Item 8. Financial Statements and Supplementary Data for a discussion of new accounting pronouncements.

EFFECT OF INFLATION

Inflationary increases in certain input costs, such as energy, wood fiber and chemical costs, can impact the Company’s operating results as can general inflationary conditions, including labor market conditions, economic activity, consumer behavior, and supply shortages and disruptions. During 2024, inflationary pressures stabilized and moderated over the year and did not have a significant impact on our

operating results. The Company's operating results are more strongly influenced by economic supply and demand factors in specific markets due to the impact on sales prices and volumes and exchange rate fluctuations when compared to inflationary factors.

FOREIGN CURRENCY EFFECTS

International Paper has operations in a number of countries. Its operations in those countries also export to, and compete with imports from other regions. As such, currency movements can have a number of direct and indirect impacts on the Company’s financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities. Indirect impacts include the change in competitiveness of imports into, and exports out of, the United States (and the impact on local currency pricing of products that are traded internationally). In general, a weaker U.S. dollar and stronger local currency is beneficial to International Paper. The currency that has the most impact is the Euro.

MARKET RISK

We use financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Additionally, financial instruments, including various derivative contracts, are used to hedge exposures to interest rate, commodity and foreign currency risks. We do not use financial instruments for trading purposes. Information related to International Paper’s debt obligations is included in Note 15 Debt and Lines of Credit on pages 84 and 85 of Item 8. Financial Statements and Supplementary Data.

The fair value of our debt and financial instruments varies due to changes in market interest and foreign currency rates and commodity prices since the inception of the related instruments. We assess this market risk utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and currency rates and commodity prices.

INTEREST RATE RISK

Our exposure to market risk for changes in interest rates relates primarily to short- and long-term debt obligations and investments in marketable securities. We invest in investment-grade securities of financial institutions and money market mutual funds with a minimum rating of AAA and limit exposure to any one

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issuer or fund. Our investments in marketable securities at December 31, 2024 and 2023 are stated at cost, which approximates market due to their short-term nature. Our interest rate risk exposure related to these investments was not material.

We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions. Derivative instruments, such as interest rate swaps, may be used to execute this strategy. At December 31, 2024 and 2023, the fair value of the net liability of financial instruments with exposure to interest rate risk was approximately $4.0 billion and $4.3 billion, respectively. The potential increase in fair value resulting from a 10% adverse shift in quoted interest rates would have been approximately $206 million and $301 million at December 31, 2024 and 2023, respectively.

COMMODITY PRICE RISK

The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities. Commodity swap or forward purchase contracts may be used to manage risks associated with market fluctuations in energy prices. At December 31, 2024 and 2023, the net fair value of these contracts was $3 million asset and $27 million asset. The potential loss in fair value from a 10% adverse change in quoted commodity prices for these contracts would have been approximately $1 million and $4 million at December 31, 2024 and 2023, respectively.

FOREIGN CURRENCY RISK

International Paper transacts business in many currencies and is also subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries. The currency that has the most impact is the Euro. Our objective in managing the associated foreign currency risks is to minimize the effect of adverse exchange rate fluctuations on our after-tax cash flows. We address these risks on a limited basis by entering into cross-currency interest rate swaps, or foreign exchange contracts.

At December 31, 2024 and 2023, the net fair value of financial instruments with exposure to foreign currency risk was immaterial. The potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates was also immaterial.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in “Financial Statements

and Supplementary Data” of this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report on Form 10-K,

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particularly in “Risk Factors” and “Forward-Looking Statements.”

The following generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussion of historical items in 2021, and year-to-year comparisons between 2022 and 2021, can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 17, 2023, under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

EXECUTIVE SUMMARY

Full-year 2023 net earnings attributable to shareholders were $288 million ($0.82 per diluted share) compared with $1.5 billion ($4.10 per diluted share) for full-year 2022.

During 2023, International Paper executed well, both commercially and operationally, as we navigated an uncertain and challenging demand environment. During much of the year, underlying demand for our products was lower as consumers prioritized spending on services and essential goods. This trend was influenced by the pull forward of goods during the pandemic, as well as by inflationary pressures and rising interest rates that impacted the consumer. Demand for our products was further constrained by inventory destocking as our customers, and the broader supply chain, worked through elevated inventories of their products. The lower demand combined with declining sales prices and continued cost inflation resulted in lower sales and earnings in 2023 as compared to 2022. During 2023, we remained focused on mitigating the impact of these challenges through commercial and cost reduction initiatives. We advanced our strategies to improve profitability across our portfolio by investing in capabilities in our Industrial Packaging business to enhance our value proposition to align with customer needs and optimizing our Global Cellulose Fibers business by reducing our exposure to commodity pulp. We took strategic actions to structurally reduce fixed costs in our mill system in both our Industrial Packaging and Global Cellulose Fibers businesses. We also made significant progress in Building a Better IP, driven by commercial and process improvement initiatives, resulting in benefits exceeding our 2023 target. Regarding capital allocation in 2023, we returned approximately $840 million to shareowners including approximately $640 million of dividends and $200 million of share repurchases. Finally, during 2023, we completed the sale of our ownership stake in Ilim for $508 million. International Paper no longer has investments in Russia following completion of this sale.

Comparing 2023 performance to 2022, price and mix was lower in our North American Industrial Packaging business due to prior index movements, lower export prices and higher export mix, as demand improved. Price in our Global Cellulose Fibers business was lower due to prior index movements and an unfavorable mix driven by lower absorbent pulp shipments. Volume in both business segments was impacted by ongoing inventory destocking across the supply chain. While there was demand recovery in the second half of the year in both business segments, volume was lower in our North American Industrial Packaging business as consumers shifted priorities toward non-discretionary goods and services while dealing with inflation. Volume in our Global Cellulose Fibers business was also impacted by lower demand as a result of the slowdown in the global economy. Operations and costs in both the North American Industrial Packaging and Global Cellulose Fibers businesses were higher reflecting the impact of inflation on materials and services along with the impact of higher unabsorbed costs resulting from increased economic downtime in the current year. Planned maintenance outage costs were lower in our North American Industrial Packaging business while higher in our Global Cellulose Fibers business. Input costs were lower in both business segments, primarily driven by lower energy, wood and distribution costs along with lower recovered fiber costs in our North American Industrial Packaging business.

Looking ahead to the first quarter 2024, as compared to the fourth quarter 2023, we expect this quarter to be an earnings trough on seasonally lower volumes, higher costs and from the impact of the January winter freeze. We also expect the majority of prior index movements to flow through in the first quarter 2024. Specifically in our Industrial Packaging business, we expect price to be relatively flat as prior price index movements are offset by the commercial benefits from contract restructuring in the box business. Volume is expected to be lower in the first quarter 2024 due to normal seasonal declines in North America, partially offset by two more shipping days. Operations and costs are expected to decrease earnings due to seasonally higher energy consumption and cost inflation on wages and employee benefits. These increases are expected to be partially offset by lower fixed costs resulting from the closure of our Orange, Texas mill. Maintenance outage expense is expected to be higher coming off of a seasonally lower fourth quarter 2023. Input costs are expected to decrease earnings on higher recovered fiber and energy costs. In our Global Cellulose Fibers business, we expect price and mix to modestly improve as a result of our strategy to reduce

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exposure to commodity pulp. We expect volume to be relatively flat as seasonally lower shipments due to the Chinese New Year are offset by improved demand in other areas. Operations and costs are expected to decrease earnings due to seasonality and cost inflation, partially offset by the non-repeat of a turbine maintenance outage and lower fixed costs resulting from the idling of our pulp machine in our Riegelwood, North Carolina mill. Maintenance outage expense is expected to increase earnings while higher input costs associated with energy and chemicals are expected to decrease earnings.

Looking at full-year 2024, we see a transitional year where markets continue to recover as we focus on improving mix and margins in both business segments through execution of our commercial strategies. We expect demand trends to continue to improve across our portfolio with year-over-year industry growth of approximately three percent for packaging and fluff pulp. Additionally, we expect more than $400 million of net benefits from our commercial and operational initiatives. This includes the fixed cost reductions tied to the closure of our Orange, Texas containerboard mill and the permanent shutdown of two pulp machines in our Global Cellulose Fibers business, with the benefits of both strategic actions expected to be at a full run rate by the fourth quarter 2024. These cost saving initiatives will be important in offsetting expected higher costs for recovered fiber, transportation and general inflation on wages, employee benefits, materials and services. With respect to our capital allocation framework, we are targeting capital expenditures of $800 million - $1.0 billion in 2024 for general maintenance, cost improvement and to enhance capabilities in our box business. As previously mentioned, we returned approximately $840 million of cash to shareowners in 2023 including approximately $640 million of dividends. Given our strategic customer relationships, talented teams, world class assets and market expertise, we are committed to maximizing long-term value for all our stakeholders.

As previously disclosed, the Company permanently closed its containerboard mill in Orange, Texas in December 2023 and permanently ceased production of two of its pulp machines at its Riegelwood, North Carolina and Pensacola, Florida mills on December 11, 2023. The mill closure resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of approximately $347 million and pre-tax cash severance and other shutdown charges of approximately $81 million during the year ended

December 31, 2023. The machine shutdowns resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of approximately $75 million and pre-tax cash severance and other shutdown charges of approximately $37 million during the year ended December 31, 2023.

Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding discontinued operations, net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and items considered by management to be unusual (net special items) from net earnings (loss) attributable to shareholders reported under GAAP. Adjusted Operating Earnings Per Share is calculated by dividing Adjusted Operating Earnings by diluted average shares of common stock outstanding. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results from continuing operations. The Company believes that using this information, along with the most directly comparable GAAP measure, provides for a more complete analysis of the results of operations.

The following are reconciliations of Earnings (loss) attributable to common shareholders to Adjusted operating earnings (loss) attributable to common shareholders on a total and per share basis. Additional detail is provided later in this Annual Report on Form 10-K regarding the net special items referenced in the charts below:

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Cash provided by operations, including discontinued operations, totaled approximately $1.8 billion and $2.2 billion for 2023 and 2022, respectively. The Company generated free cash flow of approximately $692 million in 2023 and $1.2 billion in 2022. Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing underlying operational performance, we believe that free cash flow also enables investors to perform meaningful comparisons between past and present periods.

The following are reconciliations of free cash flow to cash provided by operations:

The non-GAAP financial measures presented in this Annual Report on Form 10-K as referenced above have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies utilize identical calculations, the Company’s presentation of non-GAAP measures in this Annual Report on Form 10-K may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company.

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RESULTS OF OPERATIONS

Business Segment Operating Profits (Losses) are used by International Paper’s management to measure the earnings performance of its businesses. Management uses this measure to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides a more complete analysis of the results of operations by year.

Business Segment Operating Profits (Losses) are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of less than wholly owned subsidiaries, and excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business Segment Operating Profits (Losses) is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280 - "Segment Reporting".

International Paper operates in two segments: Industrial Packaging and Global Cellulose Fibers. On September 18, 2023, the Company completed the sale of its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment in Ilim is no longer a separate reportable industry segment. For additional information, see discussion in Note 11 – Equity method Investments on pages 69 and 70 of Item 8. Financial Statements and Supplementary Data.

The following table presents a comparison of Net earnings (loss) from continuing operations attributable to International Paper Company to its total Business Segment Operating Profit (Loss):

Business Segment Operating Profit (Loss) in 2023 was $599 million lower than in 2022 as the benefits from lower input costs ($982 million) and lower maintenance outage costs ($8 million) were more than offset by lower average sales price realizations and an unfavorable mix ($435 million), lower sales volumes ($228 million) and higher operating costs ($926 million).

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The principal changes in operating profit by business segment were as follows:

•Industrial Packaging’s operating profit of $1.3 billion was $476 million lower than in 2022 as the benefits of lower input costs and maintenance outage costs were more than offset by lower average sales price and an unfavorable mix, lower sales volumes and higher operating costs.

•Global Cellulose Fibers' operating profit (loss) of $(17) million was $123 million lower than in 2022 as the benefits of lower input costs were more than offset by lower average sales price and an unfavorable mix, lower sales volumes, higher operating costs and maintenance outage costs.

LIQUIDITY AND CAPITAL RESOURCES

Including discontinued operations, International Paper generated $1.8 billion of cash flow from operations for the year ended December 31, 2023, compared with $2.2 billion in 2022. Capital spending for 2023 totaled $1.1 billion, or 80% of depreciation and amortization expense. Our liquidity position remains strong,

supported by approximately $1.9 billion of credit facilities.

RESULTS OF OPERATIONS

While the operating results for International Paper’s various business segments are driven by a number of business-specific factors, changes in International Paper’s operating results are closely tied to changes in general economic conditions in North America, Europe, Latin America, North Africa and the Middle East.

Factors that impact the demand for our products include industrial non-durable goods production, consumer preferences, consumer spending and movements in currency exchange rates.

Product prices are affected by a variety of factors including general economic trends, inventory levels, currency exchange rate movements and worldwide capacity utilization. In addition to these revenue-related factors, net earnings are impacted by various cost drivers, the more significant of which include changes in raw material costs, principally wood,

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recovered fiber and chemical costs; energy costs; freight costs; mill outage costs; salary and benefits costs, including pensions; and manufacturing conversion costs.

The following is a discussion of International Paper’s consolidated results of operations for the year ended December 31, 2023, and the major factors affecting these results compared to 2022.

For the year ended December 31, 2023, International Paper reported net sales of $18.9 billion, compared with $21.2 billion in 2022. International net sales (based on the location of the seller and including U.S. exports) totaled $5.3 billion or 28% of total sales in 2023. This compares with international net sales of $5.9 billion in 2022.

Full year 2023 net earnings attributable to International Paper Company totaled $288 million ($0.82 per diluted share), compared with net earnings of $1.5 billion ($4.10 per diluted share) in 2022. Amounts in 2023 and 2022 include the results of discontinued operations.

Earnings from continuing operations attributable to International Paper Company after taxes in 2023 and 2022 were as follows:

(a)Includes $412 million of net special items charges and $41 million of non-operating pension expense.

(b)Includes $429 million of net special items income and $144 million of non-operating pension income.

Compared with 2022, the benefits from lower input costs ($743 million), lower maintenance outage costs ($6 million), lower corporate and other costs ($3 million), lower net interest expense ($25 million) and lower tax expense ($8 million) were more than offset by lower average sales price and an unfavorable mix ($329 million), lower sales volumes ($172 million) and higher operating costs ($700 million). In addition, excluding special items, 2023 results included higher equity earnings, net of taxes. Our Building a Better IP initiatives delivered $260 million of earnings in 2023 primarily though our strategy acceleration initiative to deliver profitable growth through commercial and investment excellence.

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See Business Segment Results on pages 36 and 37 of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the impact of these factors by segment.

DISCONTINUED OPERATIONS

On September 18, 2023, the Company completed the sale of its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment is no longer a separate reportable industry segment. This transaction is discussed further in Note 11 - Equity Method Investments on pages 69 and 70 of Item 8. Financial Statements and Supplementary Data for further discussion.

Discontinued operations include the equity earnings of the prior Ilim joint venture. Discontinued operations also includes after-tax losses of $126 million and $533 million in 2023 and 2022, respectively for impairment and transaction costs related to our former equity method investment in the Ilim joint venture.

INCOME TAXES

A net income tax provision from continuing operations of $59 million was recorded for 2023 and the reported effective income tax rate was 15%. This includes a tax benefit of $23 million related to the settlement of tax audits and tax expense of $4 million related to internal legal entity restructuring. Excluding these items, a $141 million net tax benefit for other special items and a $13 million tax benefit related to non-operating pension expense, the operational tax provision (non-GAAP) for 2023 was $232 million, or 23% of pre-tax earnings before equity earnings.

A net income tax benefit from continuing operations of $236 million was recorded for 2022 and the reported effective income tax rate was (16%). This includes a tax benefit of $604 million related to the settlement of the timber monetization restructuring tax matter, a tax benefit of $66 million related to the tax-free exchange of our shares of Sylvamo and tax expense of $45 million related to a foreign deferred tax valuation allowance. Excluding these items, a $37 million net tax benefit for other special items and $48 million tax expense related to non-operating pension income, the operational tax provision (non-GAAP) for 2022 was $378 million, or 24% of pre-tax earnings before equity earnings.

The operational tax provision and operational effective tax rate are non-GAAP financial measures and are calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items and non-operating pension expense (income). Management believes that this presentation provides useful information to investors by providing a meaningful comparison of the income tax rate between past and present periods.

The following is a reconciliation of the net income tax provision (benefit) to the operational tax provision and rate:

INTEREST EXPENSE AND EQUITY EARNINGS, NET OF TAXES

Net corporate interest expense totaled $231 million in 2023 and $325 million in 2022. Net interest expense includes $3 million and $58 million of interest expense related to the timber monetization restructuring tax matter in 2023 and 2022, respectively. Net interest expense in 2023 also includes $6 million of interest income associated with the settlement of tax audits. The decrease in net interest expense in 2023 compared with 2022 was due to higher interest income.

Equity earnings, net of taxes were a loss of $21 million and a loss of $6 million in 2023 and 2022, respectively. Equity earnings in 2023 includes an $18 million other-than-temporary impairment of an equity method investment.

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SPECIAL ITEMS

Pre-tax special items (excluding interest expense and equity earnings) included in continuing operations totaling $557 million and $175 million were recorded in 2023 and 2022, respectively. Details of these charges were as follows:

(a) Recorded in the Industrial Packaging business segment.

(b) Recorded in the Global Cellulose Fibers business segment.

(c) Recorded in the Industrial Packaging business segment for the impairment of goodwill in our EMEA Packaging business.

International Paper continually evaluates its operations for improvement opportunities targeted to (a) focus our portfolio on our core businesses, (b) realign capacity to operate fewer facilities with the same revenue capability, (c) close high cost, unprofitable facilities, and (d) reduce costs. Additionally, the Company is committed to its capital allocation framework to maintain a strong balance sheet including reducing debt to maximize value creation and maintain our current investment grade credit rating.

During 2023 and 2022, pre-tax restructuring and other charges, net, totaling $99 million and $89 million, respectively, were recorded. Details of these charges were as follows:

(a) Recorded in the Industrial Packaging business segment.

(b) Recorded in the Global Cellulose Fibers segment.

(c) Includes $8 million income recorded in the Industrial Packaging business segment and $3 million income recorded in the Global Cellulose Fibers business segment.

DESCRIPTION OF BUSINESS SEGMENTS

International Paper’s business segments discussed below are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the forest products industry.

INDUSTRIAL PACKAGING

The majority of our business is focused on creating fiber-based packaging that protects and promotes goods, enables worldwide commerce and helps keep consumers safe. We meet our customers’ most challenging sales, shipping, storage and display requirements with sustainable solutions. Our U.S. production capacity is over 13 million tons annually.

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Our products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. About 80% of our production is converted into corrugated packaging and other packaging by our 173 North American corrugated packaging plants. Additionally, we recycle approximately one million tons of OCC and mixed and white paper through our 16 U.S. recycling plants. Our corrugated packaging plants are supported by regional design centers, which offer total packaging solutions and supply chain initiatives. In EMEA, our operations include a recycled fiber containerboard mill in Morocco and one in Spain and 23 corrugated packaging plants in France, Italy, Spain, Morocco and Portugal.

GLOBAL CELLULOSE FIBERS

Cellulose fibers are a sustainable, renewable raw material used in a variety of products people depend on every day. We create safe, quality pulp for a wide range of applications like diapers, towel and tissue products, feminine care, incontinence and other personal care products that promote health and wellness. In addition, our innovative specialty pulps serve as a sustainable raw material used in textiles, construction materials, paints, coatings and more. Our products are made in the United States and Canada and sold around the world. International Paper facilities have annual dried pulp capacity of about 3 million metric tons.

BUSINESS SEGMENT RESULTS

The following tables present net sales and operating profit (loss) which is the Company's measure of segment profitability.

INDUSTRIAL PACKAGING

Demand for Industrial Packaging products is closely correlated with non-durable industrial goods production, as well as with demand for e-commerce, processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major factors affecting the profitability of Industrial Packaging are raw material and energy costs, freight costs, mill outage costs, manufacturing efficiency and product mix.

Industrial Packaging net sales for 2023 decreased 11% to $15.6 billion compared with $17.5 billion in 2022. Operating profits in 2023 were 27% lower than in 2022. Comparing 2023 with 2022, benefits from lower input costs ($856 million) and maintenance

outage costs ($21 million) were more than offset by lower average sales price and an unfavorable mix ($363 million), lower sales volumes ($177 million) and higher operating costs ($813 million).

(a) Includes intra-segment sales of $95 million for 2023 and $132 million for 2022.

North American Industrial Packaging's average sales margins were lower, reflecting lower prices for both containerboard and corrugated boxes and an unfavorable geographic mix. Sales volumes decreased in 2023 compared with 2022 for corrugated boxes across our segments, reflecting a soft demand environment as consumer spending focused on non-discretionary goods and services and retailers and manufacturers pulled down inventory levels. Containerboard sales volumes also decreased. Total maintenance and economic downtime was about 725,000 short tons higher in 2023 compared with 2022, primarily due to economic downtime. Operating and distribution costs increased, primarily due to inflation on materials and services and increased economic downtime. Planned maintenance downtime costs were lower in 2023 than in 2022. Input costs were significantly lower, driven by lower recovered fiber, energy and wood costs.

Looking ahead to the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes for corrugated boxes and containerboard are expected to be seasonally lower. Average sales margins are expected to be stable. Operating costs are expected to increase. Planned maintenance downtime costs are expected to be higher. Input costs are expected to be higher, primarily for recovered fiber.

EMEA Industrial Packaging's average sales margins were lower reflecting lower average sales prices for containerboard and an unfavorable product mix partially offset by higher average sales prices for corrugated boxes. Sales volumes in 2023 were lower than in 2022 driven by soft demand. Operating costs in 2023 were higher driven by inflation on materials and services. Planned maintenance outage costs were lower in 2023 compared with 2022. Input costs were significantly lower in 2023, driven by energy and recovered fiber costs.

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Entering the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes are expected to be higher driven by seasonality. Average sales margins are expected to be higher, reflecting lower containerboard costs. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be lower. Other input costs are expected to be stable. Earnings will be impacted by the non-repeat of an energy subsidy and other favorable one-time items in the fourth quarter 2023.

GLOBAL CELLULOSE FIBERS

Demand for Cellulose Fibers products is closely correlated with changes in demand for absorbent hygiene products, primarily driven by the demographics and income growth in various geographic regions. It is further affected by changes in currency rates that can benefit or hurt producers in different geographic regions. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs, and freight costs.

Global Cellulose Fibers net sales for 2023 decreased 10% to $2.9 billion, compared with $3.2 billion in 2022. Operating profits in 2023 decreased compared to 2022. Comparing 2023 with 2022, benefits from lower input costs ($126 million) were more than offset by lower average sales price and an unfavorable mix ($72 million), lower sales volumes ($51 million), higher operating costs ($113 million) and higher maintenance outage costs ($13 million).

Sales volumes in 2023 compared with 2022 were lower, driven by customer inventory destocking. Total maintenance and economic downtime was about 507,000 short tons higher in 2023 compared with 2022, primarily due to economic downtime. Average sales margins were lower, reflecting lower average market pulp prices and an unfavorable product mix partially offset by higher average fluff pulp prices. Operating costs increased, driven by inflation on materials and services and downtime. Distribution costs were lower as the global supply chain environment improved. Planned maintenance outage costs were higher in 2023. Input costs were lower, driven by energy, freight, wood and chemicals.

Entering the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes are expected to be stable. Average sales margins are expected to be stable. Operating costs are expected to be higher. Planned maintenance outage costs are expected to be lower than in the fourth quarter of 2023. Input costs are expected to be higher, primarily for energy and chemicals.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

A major factor in International Paper’s liquidity and capital resource planning is generation of operating cash flow, which is highly sensitive to changes in the pricing and demand for our major products. While changes in key operating cash costs, such as raw material, energy, mill outage and distribution, have an effect on operating cash generation, we believe our focus on commercial and operational excellence, as well as our ability to tightly manage costs and working capital has improved our cash flow generation over an operating cycle.

Use of cash during 2023 was primarily focused on working capital requirements, capital spending and returning cash to shareholders through dividends and share repurchases under the Company's share repurchase program.

CASH PROVIDED BY OPERATING ACTIVITIES

Cash provided by operations, including discontinued operations, totaled $1.8 billion in 2023, compared with $2.2 billion for 2022. Cash used by working capital components (accounts receivable, contract assets and inventory less accounts payable and accrued liabilities, interest payable and other) totaled $2 million in 2023, compared with cash used by working capital components of $145 million in 2022. Cash dividends received from equity investments were $13 million in 2023, compared with $204 million in 2022.

INVESTMENT ACTIVITIES

Investment activities in 2023 increased from 2022. Capital spending was $1.1 billion in 2023, or 80% of depreciation and amortization, compared with $931 million in 2022, or 90% of depreciation and amortization. Included in 2023 depreciation expense is $347 million of accelerated depreciation related to

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the closure of our containerboard mill in Orange, Texas and $75 million of accelerated depreciation related to the permanent shutdown of pulp machines at our Riegelwood, North Carolina and Pensacola, Florida mills. Capital spending as a percentage of depreciation and amortization was 62% for Global Cellulose Fibers and 81% for Industrial Packaging in 2023.

The following table shows capital spending by business segment for the years ended December 31, 2023 and 2022:

Capital spending in 2024 is expected to be approximately $800 million to $1.0 billion, or 78% to 97% of expected depreciation and amortization.

Acquisitions

See Note 7 Acquisitions on page 65 of Item 8. Financial Statements and Supplementary Data for a discussion of the Company's acquisitions.

FINANCING ACTIVITIES

Financing activities during 2023 included debt issuances of $783 million and reductions of $780 million for a net increase of $3 million. Financing activities during 2022 included debt issuances of $1.0 billion and reductions of $1.0 billion.

There were no early debt extinguishment amounts during the year ended December 31, 2023. Amounts related to early debt extinguishment during the year ended December 31, 2022 are below:

(a)Reductions related to notes with interest rates ranging from 3.00% to 8.70% with original maturities from 2021 to 2048 for the year ended December 31, 2022.

(b)Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations.

Other financing activities during 2023 included the net issuance of approximately 1.6 million shares of treasury stock. Repurchases of common stock and payments of restricted stock withholding taxes totaled $218 million, including $197 million related to shares repurchased under the Company's share repurchase program. Through December 31, 2023, the Company

has repurchased 119.8 million shares at an average price of $46.23, for a total of approximately $5.5 billion, since the repurchase program began in September 2013. The Company paid cash dividends totaling $642 million during 2023.

Other financing activities during 2022 included the net issuance of approximately 1.6 million shares of treasury stock. In 2022, repurchases of common stock and payments of restricted stock withholding taxes totaled $1.3 billion, including $1.3 billion related to shares repurchased under the Company's share repurchase program. The Company paid cash dividends totaling $673 million during 2022.

Interest Rate Swaps

Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk, International Paper utilizes interest rate swaps to change the mix of fixed and variable rate debt. During 2020, International Paper terminated its interest rate swaps with a notional amount of $700 million and maturities ranging from 2024 to 2026 with an approximate fair value of $85 million. Subsequent to the termination of the interest rate swaps, the fair value basis adjustment is amortized to earnings as interest income over the same period as a debt premium on the previously hedged debt. The Company had no outstanding interest rate swaps for the years ended December 31, 2023 and 2022.

Variable Interest Entities

Information concerning variable interest entities is set forth in Note 15 Variable Interest Entities on pages 78 through 80 of Item 8. Financial Statements and Supplementary Data. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 (the "2015 Financing Entities") when the installment notes and third-party loans were extended. The 2015 Financing Entities held installment notes of $4.8 billion and third-party loans of $4.2 billion which both matured in August 2021. We settled the third-party loans at their maturity with the proceeds from the installment notes. This resulted in cash proceeds of approximately $630 million representing our equity in the 2015 Financing Entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021. On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the 2015 Financing Entities timber monetization restructuring tax matter. Under this

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agreement, the Company agreed to fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest was charged upon closing of the audit. The amount of interest expense recognized in 2022 was $58 million. As of December 31, 2023, $252 million in U.S. federal income taxes and $58 million in interest expense have been paid as a result of the settlement agreement. The Company has now fully satisfied the payment terms of the settlement agreement regarding the 2015 Financing Entities timber monetization restructuring tax matter. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was recognized as a one-time tax benefit in the third quarter of 2022.

LIQUIDITY AND CAPITAL RESOURCES OUTLOOK FOR 2024

We intend to continue making choices for the use of cash that are consistent with our capital allocation framework to drive long-term value creation. These include maintaining a strong balance sheet and investment grade credit rating, returning meaningful cash to shareholders through dividends and share repurchases and making organic investments to maintain our world-class system and strengthen our businesses.

On October 11, 2022, our Board of Directors approved an additional $1.5 billion under our share repurchase program. This program does not have an expiration date and has approximately $2.96 billion aggregate amount of shares of common stock remaining authorized for purchase as of December 31, 2023. We may continue to repurchase shares under such authorization in open market transactions (including block trades), privately negotiated transactions or otherwise, subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. In addition, we have paid regular quarterly cash dividends and expect to continue to pay regular quarterly cash dividends in the foreseeable future. Each quarterly dividend is subject to review and approval by our Board of Directors.

Capital Expenditures and Long-Term Debt

Capital spending for 2024 is planned at approximately $800 million to $1.0 billion, or about 78% to 97% of depreciation and amortization.

At December 31, 2023, International Paper’s credit agreements totaled $1.9 billion, which is comprised of the $1.4 billion contractually committed bank credit agreement and up to $500 million under the receivables securitization program. In June 2023, the Company amended and restated its credit agreement

to, among other things (i) reduce the size of the contractually committed bank facility from $1.5 billion to $1.4 billion, (ii) extend the maturity date from June 2026 to June 2028, and (iii) replace the LIBOR-based rate with a SOFR-based rate. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. At December 31, 2023, the Company had no borrowings outstanding under the $1.4 billion credit agreement or the $500 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed on pages 80 and 81 in Note 16 - Debt and Lines of Credit of Item 8. Financial Statements and Supplementary Data, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at December 31, 2023 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.

In addition to the $1.9 billion capacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 billion supported by its $1.4 billion credit agreement. Under the terms of the Company's commercial paper program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. The Company had no borrowings outstanding as of December 31, 2023, and $410 million outstanding as of December 31, 2022, under this program.

During the first quarter of 2023, the Company entered into a variable term loan agreement providing for a $600 million term loan which was fully drawn on the date of such loan agreement and matures in 2028. The $600 million debt was issued following the repayment of $410 million of commercial paper earlier in 2023. Additionally, during the first quarter of 2023, the Company issued an approximately $72 million environmental development bond ("EDB") with an interest rate of 4.00% and a maturity date of April 1, 2026. The proceeds from this issuance were used to repay an approximately $72 million outstanding EDB that matured on April 1, 2023.

During the second quarter of 2023, the Company issued approximately $24 million of debt with a variable interest rate and a maturity date of December 1, 2027. The Company had debt

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reductions of approximately $49 million of variable interest EDBs with current maturities. Additionally, during the second quarter of 2023, the Company issued an approximately $54 million EDB with a variable rate and a maturity date of May 1, 2028. The proceeds of this were used to repay an approximately $54 million EDB that matured on May 1, 2023. The Company issued an approximately $25 million EDB with a variable rate and a maturity date of June 1, 2030. The proceeds of this were used to repay an approximately $25 million EDB that matured on June 1, 2023.

During the third quarter of 2023, the Company repaid an approximately $70 million EDB with an interest rate of 2.90% that matured on September 1, 2023.

During the fourth quarter of 2023, the Company repaid an approximately $87 million note with an interest rate of 6.875% that matured on November 1, 2023. Additionally, the Company issued approximately $11 million of debt with a variable interest rate and a maturity date of December 1, 2027.

For additional information regarding the Company’s credit agreements and outstanding indebtedness, see Note 16 Debt and Lines of Credit on pages 80 and 81 of Item 8. Financial Statements and Supplementary Data.

International Paper expects to be able to meet projected capital expenditures, service existing debt, meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months and for the foreseeable future thereafter with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and maintain appropriate levels of liquidity to meet our needs while managing balance sheet debt and interest expense. We have repurchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt (including through open market purchases, privately negotiated transactions or otherwise) to the extent consistent with this capital structure planning, and subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors.

Maintaining an investment grade credit rating is an important element of International Paper’s financing strategy. At December 31, 2023, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively.

Contractual obligations for future payments under existing debt and lease commitments and purchase obligations at December 31, 2023, were as follows:

(a)Includes financing lease obligations.

(b)Includes $3.8 billion relating to fiber supply agreements.

(c)Not included in the above table due to the uncertainty of the amount and timing of the payment are unrecognized tax benefits of approximately $168 million. Also not included in the above table is $84 million of Deemed Repatriation Transition Tax associated with the 2017 Tax Cuts and Jobs Act which will be settled from 2024 - 2026. Additionally, the deferred tax liability of $485 million related to the Temple-Inland timber monetization is not included in the table above. It will be settled with the maturity of the notes in 2027.

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2023, to be permanently reinvested and, accordingly, no U.S. income taxes have been provided thereon (see Note 13 Income Taxes on pages 72 through 74 of Item 8. Financial Statements and Supplementary Data). We do not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Pension Obligations and Funding

At December 31, 2023, the projected benefit obligation for the Company’s U.S. defined benefit plans determined under U.S. GAAP was approximately $146 million higher than the fair value of plan assets, excluding non-U.S. plans. Plans that are subject to minimum funding requirements had plan assets of $118 million higher than the projected benefit obligation. Under current IRS funding rules, the calculation of minimum funding requirements differs from the calculation of the present value of plan benefits (the "projected benefit obligation") for accounting purposes. Funding contributions depend on the funding methods selected by the Company. The selected methods allow for the smoothing of asset values and interest rates used to measure the funding obligations. The Company continually reassesses the amount and timing of any

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discretionary contributions and elected not to make any voluntary contributions in 2021, 2022 or 2023. At this time, we do not expect to have any required contributions to our plans in 2024, although the Company may elect to make future voluntary contributions. The timing and amount of future contributions, which could be material, will depend on a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require subjective judgments about matters that are inherently uncertain.

Accounting policies whose application has had or is reasonably likely to have a material impact on the reported results of operations and financial position of International Paper, and that can require a significant level of estimation or uncertainty by management that affect their application, include the accounting for contingencies, impairment or disposal of long-lived assets and goodwill, pensions and income taxes. Management has discussed the selection of critical accounting policies and the effect of significant estimates with the Audit and Finance Committee of the Company’s Board of Directors and with its independent registered public accounting firm.

CONTINGENT LIABILITIES

Accruals for contingent liabilities, including personal injury, product liability, environmental, asbestos and other legal matters, are recorded when it is probable that a liability has been incurred or an asset impaired and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical litigation and settlement experience and recommendations of legal counsel and, if applicable, other experts. Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. The Company estimated the probable liability associated with environmental matters to be approximately $251 million and $243 million in the aggregate as of December 31, 2023 and 2022, respectively. Liabilities for asbestos-related matters require reviews of recent and historical claims data. The Company's total recorded liability with respect to pending and future

asbestos-related claims was $97 million and $105 million, net of estimated insurance recoveries, as of December 31, 2023 and 2022, respectively. The Company utilizes its in-house legal counsel and environmental experts to develop estimates of its legal, environmental and asbestos obligations, supplemented as needed by third-party specialists to analyze its most complex contingent liabilities.

IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed by comparing the undiscounted cash flows to carrying value of the assets. If the carrying amount is less than the undiscounted cash flows, the fair value of the assets is compared to the carrying value to determine if they are impaired. An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value.

We perform an annual goodwill impairment as of October 1. Additionally, interim assessments of possible impairments of goodwill are also made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. A goodwill impairment exists when the carrying amount of goodwill exceeds its fair value.

The amount and timing of goodwill and long-lived asset impairment charges based on these assessments requires the estimation of future cash flows or the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes, operating, raw material, energy and freight costs, various other projected operating economic factors and other intended uses of the assets.

ASU 2011-08, "Intangibles - Goodwill and Other," allows entities testing goodwill for impairment the option of performing a qualitative assessment before performing the quantitative goodwill impairment test. If a qualitative assessment is performed, an entity is not required to perform the quantitative goodwill impairment test unless the entity determines that, based on that qualitative assessment, it is more likely than not that its fair value is less than its carrying value.

The North America Industrial Packaging reporting unit is the Company’s only reporting unit with goodwill. As of October 1, 2023, we performed our annual goodwill impairment test for this reporting unit through a quantitative goodwill impairment test. For the 2023 quantitative assessment, the estimated fair value of

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the reporting unit was calculated using a weighted approach based on discounted future cash flows, market multiples and transaction multiples. The determination of fair value using the discounted cash flow approach requires management to make significant estimates and assumptions related to forecasts of future revenues, operating profit margins, and discount rates. The determination of fair value using market multiples and transaction multiples requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiples. The results of our quantitative goodwill impairment test indicated that the carrying amount did not exceed the estimated fair value of the North America Industrial Packaging reporting unit.

PENSION BENEFIT OBLIGATIONS

The calculation of the pension benefit obligation and corresponding expense amounts are determined annually, with involvement of International Paper’s consulting actuary, and are dependent upon various assumptions including the expected long-term rate of return on plan assets, discount rates, projected future compensation increases and mortality rates.

The calculations of pension benefit obligations and expense require decisions about a number of key assumptions that can significantly affect liability and expense amounts, including the expected long-term rate of return on plan assets and the discount rate used to calculate plan liabilities.

Benefit obligations and fair values of plan assets as of December 31, 2023, for International Paper’s pension plan were as follows:

The table below shows the discount rate used by International Paper to calculate U.S. pension obligations for the years shown:

International Paper determines these actuarial assumptions, after consultation with our actuaries, on December 31 each year or more frequently if required, to calculate liability information as of that date and pension expense for the following year. The expected long-term rate of return on plan assets is

based on projected rates of return for current asset classes in the plan’s investment portfolio. The discount rate assumption was determined based on a hypothetical settlement portfolio selected from a universe of high-quality corporate bonds.

The expected long-term rate of return on U.S. pension plan assets used to determine net periodic cost for the year ended December 31, 2023 was 6.50%.

Increasing the expected long-term rate of return on U.S. plan assets by an additional 0.25% would decrease 2024 pension expense by approximately $21 million, while a (decrease) increase of 0.25% in the discount rate would (increase) decrease pension expense by approximately $12 million.

Actual rates of return earned on U.S. pension plan assets for each of the last 10 years were:

ASC 715, “Compensation – Retirement Benefits,” provides for delayed recognition of actuarial gains and losses, including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the assumed discount rate, differences between the actual and expected return on plan assets, and other assumption changes. These net gains and losses are recognized in pension expense prospectively over a period that approximates the average remaining service period of active employees expected to receive benefits under the plans to the extent that they are not offset by gains and losses in subsequent years.

Net periodic pension plan expenses, calculated for all of International Paper’s plans, were as follows:

The increase in 2023 pension expense primarily reflects higher interest cost and lower expected return on assets, offset by lower service cost.

Assuming that discount rates, expected long-term returns on plan assets and rates of future compensation increases remain the same as of

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December 31, 2023, projected future net periodic pension plan expense (income) would be as follows:

The Company estimates that it will record net pension income of approximately $7 million for its U.S. defined benefit plans in 2024, compared to expense of $94 million in 2023.

The market value of plan assets for International Paper’s U.S. qualified pension plan at December 31, 2023 totaled approximately $8.8 billion, consisting of approximately 66% hedging assets and 34% return seeking assets. The Company’s funding policy for its qualified pension plan is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions and could elect to make voluntary contributions in the future. There were no required contributions to the U.S. qualified plan in 2023. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $22 million for the year ended December 31, 2023.

INCOME TAXES

International Paper records its global tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering technical merits of the position based on specific tax regulations and facts of each matter. Changes to recorded liabilities are only made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases that are relevant to the matter. Accrued interest related to these uncertain tax positions is recorded in our consolidated statement of operations in Interest expense, net.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in assessing the need for and magnitude of appropriate valuation allowances against deferred tax assets. This assessment is completed by tax jurisdiction and relies on both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. The Company's valuation allowance was $848 million and $677 million at December 31, 2023 and 2022, respectively.

While International Paper believes that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.

LEGAL PROCEEDINGS

Information concerning the Company’s environmental and other legal proceedings is set forth in Note 14 Commitments and Contingent Liabilities on pages 74 through 78 of Item  8. Financial Statements and Supplementary Data. The Company is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

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RECENT ACCOUNTING DEVELOPMENTS

See Note 2 Recent Accounting Developments on page 60 of Item 8. Financial Statements and Supplementary Data for a discussion of new accounting pronouncements.

EFFECT OF INFLATION

Inflationary increases in certain input costs, such as energy, wood, recycled fiber, freight and chemical costs, had an adverse impact on the Company’s operating results in 2023 and 2022. The effects of inflation have been more significant in recent years due to general inflationary conditions, including labor market conditions, economic activity, consumer behavior, supply shortages and disruptions. Sales prices and volumes are primarily influenced by economic supply and demand factors in specific markets and by exchange rate fluctuations but are also currently being impacted by the current inflationary environment.

FOREIGN CURRENCY EFFECTS

International Paper has operations in a number of countries. Its operations in those countries also export to, and compete with imports from other regions. As such, currency movements can have a number of direct and indirect impacts on the Company’s financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities. Indirect impacts include the change in competitiveness of imports into, and exports out of, the United States (and the impact on local currency pricing of products that are traded internationally). In general, a weaker U.S. dollar and stronger local currency is beneficial to International Paper. The currency that has the most impact is the Euro.

MARKET RISK

We use financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Additionally, financial instruments, including various derivative contracts, are used to hedge exposures to interest rate, commodity and foreign currency risks. We do not use financial instruments for trading purposes. Information related to International Paper’s debt obligations is included in

Note 16 Debt and Lines of Credit on pages 80 and 81 of Item 8. Financial Statements and Supplementary Data.

The fair value of our debt and financial instruments varies due to changes in market interest and foreign currency rates and commodity prices since the inception of the related instruments. We assess this market risk utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and currency rates and commodity prices.

INTEREST RATE RISK

Our exposure to market risk for changes in interest rates relates primarily to short- and long-term debt obligations and investments in marketable securities. We invest in investment-grade securities of financial institutions and money market mutual funds with a minimum rating of AAA and limit exposure to any one issuer or fund. Our investments in marketable securities at December 31, 2023 and 2022 are stated at cost, which approximates market due to their short-term nature. Our interest rate risk exposure related to these investments was not material.

We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions. Derivative instruments, such as interest rate swaps, may be used to execute this strategy. At December 31, 2023 and 2022, the fair value of the net liability of financial instruments with exposure to interest rate risk was approximately $4.5 billion and $4.3 billion, respectively. The potential increase in fair value resulting from a 10% adverse shift in quoted interest rates would have been approximately $273 million and $328 million at December 31, 2023 and 2022, respectively.

COMMODITY PRICE RISK

The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities. Commodity swap or forward purchase contracts may be used to manage risks associated with market fluctuations in energy prices. At December 31, 2023 and 2022, the net fair value of these contracts was $27 million asset and $20 million asset. The potential loss in fair value from a 10% adverse change in quoted commodity prices for these contracts would have been approximately $4 million and $3 million at December 31, 2023 and 2022, respectively.

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FOREIGN CURRENCY RISK

International Paper transacts business in many currencies and is also subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries. The currency that has the most impact is the Euro. Our objective in managing the associated foreign currency risks is to minimize the effect of adverse exchange rate fluctuations on our after-tax cash flows. We address these risks on a limited basis by entering into cross-currency interest rate swaps, or foreign exchange contracts.

At December 31, 2023 and 2022, the net fair value of financial instruments with exposure to foreign currency risk was immaterial. The potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates was also immaterial.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion

contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Forward-Looking Statements.”

The following generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussion of historical items in 2020, and

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year-to-year comparisons between 2021 and 2020, can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 18, 2022, under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

EXECUTIVE SUMMARY

Full-year 2022 net earnings attributable to shareholders were $1.5 billion ($4.10 per diluted share) compared with $1.8 billion ($4.47 per diluted share) for full-year 2021.

During 2022, International Paper grew revenue and earnings, driven by solid commercial and operational performance, while facing significant inflation and lower demand. Our businesses generated improved earnings as profit improvement initiatives and price realization offset significant inflationary cost headwinds. We continued to make solid progress in our Building a Better IP initiatives, delivering $250 million of earnings benefits through initiatives focused on lowering our cost structure and accelerating profitable growth. As a result, we exceeded our full-year target and have strong momentum going forward. We made strategic investments, primarily in our Industrial Packaging business, in support of profitable growth and will continue to make such investments to grow earnings and cash generation by building additional capabilities and capacity in our U.S. box system. We made significant progress toward achieving value-creating returns in our Global Cellulose Fibers business by delivering $100 million of earnings growth in 2022. The business expects to continue the earnings improvement in 2023. We generated full-year cash from operations of $2.2 billion and free cash flow of $1.2 billion. Our continued solid cash generation enabled us to return $1.93 billion to shareholders, including $1.26 billion in share repurchases and $673 million in dividend payments. Finally, we reached agreement to sell our 50% interest in Ilim SA to our joint venture partners for $484 million. Additionally, our partners have expressed interest in purchasing our shares in JSC Ilim Group for $24 million. Upon sale of our interests in the Ilim joint venture, which are subject to regulatory approval, we will no longer have investments in Russia.

Comparing our 2022 results to 2021, price and mix improved significantly for both the North American Industrial Packaging and Global Cellulose Fibers businesses, with strong price realization across all of our channels, along with the benefits of commercial initiatives. Volume was lower in our North American Industrial Packaging business following stronger packaging demand in 2021 as consumers had pulled forward purchases of goods during the pandemic. In

2022, demand was also negatively impacted as consumers shifted priorities toward both non-discretionary goods as well as services while dealing with inflation. Operating costs were negatively impacted by lower volumes in our North American Industrial Packaging business. High inflation on materials and services also negatively impacted operating costs in our North American Industrial Packaging and Global Cellulose Fibers businesses. Rising supply chain costs negatively impacted both businesses during 2022. Higher operating costs were partially offset by improved mill performance and reliability. Maintenance outage expense increased, as planned, impacted by high inflation on equipment, parts and contracted services. Input costs rose sharply across nearly all categories, with higher energy and fuel costs being the leading drivers. Corporate expenses were favorable driven by overhead streamlining initiatives.

Looking ahead to the first quarter 2023, as compared to the fourth quarter 2022, in our Industrial Packaging business, we expect price and mix to be lower based on prior price index movements and lower average export prices. Volume is expected to be higher in the first quarter 2023 due to four more shipping days in North America, partially offset by normal seasonal declines in North America. Operations and costs are expected to decrease earnings due to the non-repeat of favorable one-time items in the fourth quarter 2022, seasonally higher energy consumption and additional inflation on materials and services. Maintenance outage expense is expected to be significantly higher as the first quarter will be our highest outage quarter this year, representing about 40% of total planned outage costs in 2023. Input costs are expected to improve on lower average costs for energy, fuel and fiber. In our Global Cellulose Fibers business, we expect price and mix to improve. We expect volume to decrease due to seasonally lower demand and customer inventory destocking in response to increased supply chain velocity. Operations and costs are expected to increase on the non-repeat of a favorable one-time items in the fourth quarter 2022. Operations and costs will also be impacted by higher unabsorbed fixed costs due to lower volumes, seasonally higher energy consumption and additional inflation on materials and services. Maintenance outage expense is expected to increase as the first quarter 2023 will also be Global Cellulose Fibers highest maintenance outage quarter in 2023. Input costs are expected to decrease driven by lower energy and fiber.

Looking to full-year 2023, we believe we have significant opportunities to reduce high marginal costs across our system and capture further benefits from our Building a Better IP initiatives. The Building a Better IP initiatives are focused on continuing to

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invest in projects to drive structural cost reduction through efficiency improvements and accelerating profitable growth. We expect continued momentum from these initiatives as we move into 2023 including meaningful earnings growth in our Global Cellulose Fibers business as a result of our commercial strategy execution. We expect cash from operations ranging from $1.9 billion to $2.3 billion with free cash flow of $0.9 billion to $1.1 billion. Included in both ranges is approximately $190 million for the tax settlement payment related to our timber monetization transaction. With respect to our capital allocation framework, we are targeting capital expenditures of $1.0 billion to $1.2 billion with increased investments in our US box system to build additional capabilities and support profitable growth with our customers. As previously mentioned, we returned approximately $1.9 billion of cash to shareowners in 2022. In October 2022, our board of directors authorized an additional $1.5 billion of share repurchases with a total current authorization of approximately $3.2 billion. Going forward, we are committed to returning cash through maintaining our dividend and through opportunistic share repurchases.

Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding discontinued operations, net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and items considered by management to be unusual (net special items) from net earnings (loss) attributable to shareholders reported under GAAP. Adjusted Operating Earnings Per Share is calculated by dividing Adjusted Operating Earnings by diluted average shares of common stock outstanding. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results from continuing operations. The Company believes that using this information, along with the most direct comparable GAAP measure, provides for a more complete analysis of the results of operations.

The following are reconciliations of Earnings (loss) attributable to common shareholders to Adjusted operating earnings (loss) attributable to common shareholders on a total and per share basis. Additional detail is provided later in this Form 10-K regarding the net special items referenced in the charts below:

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Cash provided by operations, including discontinued operations, totaled $2.2 billion and $2.0 billion for 2022 and 2021, respectively. The Company generated free cash flow of approximately $1.2 billion in 2022 and $1.5 billion in 2021. Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing underlying operational performance, we believe that free cash flow also enables investors to perform meaningful comparisons between past and present periods.

The following are reconciliations of free cash flow to cash provided by operations:

The non-GAAP financial measures presented in this Form 10-K as referenced above have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies utilize identical calculations, the Company’s presentation of non-GAAP measures in this Form 10-K may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company.

RESULTS OF OPERATIONS

Business Segment Operating Profits are used by International Paper’s management to measure the earnings performance of its businesses. Management uses this measure to focus on on-going operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides a more complete analysis of the results of operations by year.

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Business Segment Operating Profits are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of less than wholly owned subsidiaries, and excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business Segment Operating Profits is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280.

International Paper operates in two segments: Industrial Packaging and Global Cellulose Fibers. The Company recently announced an agreement to sell its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment is no longer a separate reportable industry segment. During 2021, as a result of the spin-off of our Printing Papers business along with certain mixed-use coated paperboard and pulp businesses and the associated reclassification of these businesses to Discontinued Operations, we no longer have a Printing Paper segment and the remaining sales and operating profits previously reported in the Printing Papers business have been reclassified for segment reporting for all periods presented.

The following table presents a comparison of net earnings (loss) from continuing operations attributable to International Paper Company to its total Business Segment Operating Profit:

Business Segment Operating Profit in 2022 was $213 million higher than in 2021 as the benefits from higher average sales price realizations net of an unfavorable mix ($2.2 billion) were partially offset by lower sales volumes ($160 million), higher operating costs ($657 million), higher input costs ($1.1 billion) and higher maintenance outage costs ($70 million).

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The principal changes in operating profit by business segment were as follows:

•Industrial Packaging’s operating profit of $1.7 billion was $104 million higher than in 2021 as the benefits of higher average sales price net of an unfavorable mix were partially offset by lower sales volumes, higher operating costs, higher input costs and higher maintenance outage costs.

•Global Cellulose Fibers' operating profit (loss) improved $109 million to $106 million profit compared with 2021 as the benefits of higher average sales price, favorable mix and sales volumes were partially offset by higher operating costs, higher input costs and higher maintenance outage costs.

LIQUIDITY AND CAPITAL RESOURCES

Including discontinued operations, International Paper generated $2.2 billion of cash flow from operations for the year ended December 31, 2022, compared with $2.0 billion in 2021. Capital spending for 2022 totaled $931 million, or 90% of depreciation and amortization expense. Our liquidity position remains strong, supported by approximately $2.0 billion of credit facilities.

RESULTS OF OPERATIONS

While the operating results for International Paper’s various business segments are driven by a number of business-specific factors, changes in International Paper’s operating results are closely tied to changes in general economic conditions in North America, Europe, Latin America, North Africa and the Middle East.

Factors that impact the demand for our products include industrial non-durable goods production, consumer preferences, consumer spending and movements in currency exchange rates.

Product prices are affected by a variety of factors including general economic trends, inventory levels, currency exchange rate movements and worldwide capacity utilization. In addition to these revenue-related factors, net earnings are impacted by various cost drivers, the more significant of which include changes in raw material costs, principally wood, recovered fiber and chemical costs; energy costs; freight costs; mill outage costs; salary and benefits costs, including pensions; and manufacturing conversion costs.

The following is a discussion of International Paper’s consolidated results of operations for the year ended

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December 31, 2022, and the major factors affecting these results compared to 2021.

For the year ended December 31, 2022, International Paper reported net sales of $21.2 billion, compared with $19.4 billion in 2021. International net sales (based on the location of the seller and including U.S. exports) totaled $5.9 billion or 28% of total sales in 2022. This compares with international net sales of $5.2 billion in 2021.

Full year 2022 net earnings attributable to International Paper Company totaled $1.5 billion ($4.10 per diluted share), compared with net earnings of $1.8 billion ($4.47 per diluted share) in 2021. Amounts in 2022 and 2021 include the results of discontinued operations.

Earnings from continuing operations attributable to International Paper Company after taxes in 2022 and 2021 were as follows:

(a)Includes $429 million of net special items income and $144 million of non-operating pension income.

(b)Includes $284 million of net special items charges and $151 million of non-operating pension income.

Compared with 2021, the benefits from higher average sales price net of an unfavorable mix ($1.7 billion), lower corporate and other costs ($82 million) and lower net interest expense ($57 million) were partially offset by lower sales volumes ($129 million), higher operating costs ($530 million), higher input costs ($853 million), higher maintenance outage costs ($57 million) and higher tax expense ($79 million). In addition, 2022 results included lower equity earnings, net of taxes. Our Building a Better IP initiatives delivered $250 million of earnings in 2022 primarily though our lean effectiveness initiative which streamlined our corporate and staff functions and our strategy acceleration initiative to deliver profitable growth through commercial and investment excellence.

See Business Segment Results on pages 32 and 33 of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the impact of these factors by segment.

DISCONTINUED OPERATIONS

The Company recently announced it has reached an agreement to sell its equity investment in Ilim and has also received an indication of interest to purchase its

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equity investment in Ilim Group. All current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes in the consolidated statement of operations. This transaction is discussed further in Note 11 - Equity Method Investments on pages 66 through 68 of Item 8. Financial Statements and Supplementary Data for further discussion.

On October 1, 2021, the Company completed the spin-off of its Printing Papers business along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. On August 6, 2021, the Company completed the sale of its Kwidzyn, Poland mill which included the pulp and paper mill in Kwidzyn and supporting functions. As a result of the Sylvamo Corporation spin-off and sale of Kwidzyn, the Company no longer had a Printing Papers business segment and historical results reflect the Kwidzyn and the Printing Papers business and other businesses conveyed to Sylvamo Corporation as discontinued operations. See Note 8 - Divestitures on pages 62 through 64 of Item 8. Financial Statements and Supplementary Data for further discussion.

Discontinued operations include the equity and operating earnings of the businesses noted above. Discontinued operations also includes an after-tax net special items loss of $533 million in 2022 and gain of $330 million in 2021.

Details of these (gains) and losses were as follows:

INCOME TAXES

A net income tax benefit from continuing operations of $236 million was recorded for 2022, including a tax benefit of $604 million related to the settlement of the timber monetization restructuring tax matter, a tax

benefit of $66 million related to the tax-free exchange of our shares of Sylvamo Corporation and tax expense of $45 million related to a foreign deferred tax valuation allowance. Excluding these items, a $37 million net tax benefit for other special items and a $48 million tax expense related to non-operating pension income, the operational tax provision (non-GAAP) was $378 million, or 24% of pre-tax earnings before equity earnings.

A net income tax provision from continuing operations of $188 million was recorded for 2021. Excluding a $87 million net tax benefit for other special items and a $49 million tax expense related to non-operating pension income, the operational tax provision (non-GAAP) was $226 million, or 19% of pre-tax earnings before equity earnings.

The operational tax provision and rate are non-GAAP measures and are calculated by adjusting the income tax provision from continuing operations and rate to exclude net special items and non-operating pension expense (income). Management adjusts the income tax provision and rate to account for non-recurring, non-operational items as we believe it provides a more meaningful comparison of the income tax rate between past and present periods.

INTEREST EXPENSE, EQUITY EARNINGS, NET OF TAXES AND NONCONTROLLING INTEREST

Net corporate interest expense totaled $325 million in 2022 and $337 million in 2021. Net interest expense in 2022 includes $58 million of interest expense related to the timber monetization restructuring tax matter. The decrease in 2022 compared with 2021 was due to lower average outstanding debt.

Equity earnings, net of taxes were a loss of $6 million and income of $2 million in 2022 and 2021, respectively.

Net earnings attributable to noncontrolling interests were $2 million in 2021. There were no net earnings attributable to noncontrolling interests in 2022.

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SPECIAL ITEMS

Pre-tax special items (excluding interest expense) included in continuing operations totaling $175 million and $371 million were recorded in 2022 and 2021, respectively. Details of these charges were as follows:

(a) Allocation of income to noncontrolling interest associated with the sale of our EMEA Packaging business in Turkey.

Net (gains) losses on sales and impairments of businesses included in special items totaled a pre-tax loss of $76 million and gain of $7 million in 2022 and 2021, respectively. Details of these (gains) losses were as follows:

See Note 8 Divestitures on pages 62 through 64 of Item 8. Financial Statements and Supplementary Data for further discussion.

International Paper continually evaluates its operations for improvement opportunities targeted to (a) focus our portfolio on our core businesses, (b) realign capacity to operate fewer facilities with the same revenue capability, (c) close high cost, unprofitable facilities, and (d) reduce costs. Additionally, the Company is committed to its capital

allocation framework to maintain a strong balance sheet including reducing debt to maximize value creation and maintain our current investment grade credit rating.

During 2022 and 2021, pre-tax restructuring and other charges, net, totaling $89 million and $509 million were recorded. Details of these charges were as follows:

(a) Includes $11 million recorded in the Industrial Packaging business segment and $3 million recorded in the Global Cellulose Fibers business segment.

(b) Recorded in the Industrial Packaging business segment.

DESCRIPTION OF BUSINESS SEGMENTS

International Paper’s business segments discussed below are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the forest products industry.

INDUSTRIAL PACKAGING

International Paper is the largest manufacturer of containerboard in the United States. Our U.S. production capacity is over 13 million tons annually. Our products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. About 80% of our production is converted into corrugated packaging and other packaging by our 176 North American corrugated packaging plants. Additionally, we recycle approximately one million tons of OCC and mixed and white paper through our 16 U.S. recycling plants. Our corrugated packaging plants are supported by regional design centers, which offer total packaging solutions and supply chain initiatives. In EMEA, our operations include a recycled fiber containerboard mill in Morocco and one in Spain and 24 corrugated packaging plants in France, Italy, Spain, Morocco and Portugal.

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GLOBAL CELLULOSE FIBERS

Our cellulose fibers product portfolio includes fluff, market and specialty pulps. International Paper is the largest producer of fluff pulp which is used to make absorbent hygiene products like baby diapers, feminine care, adult incontinence and other non-woven products. Our market pulp is used for tissue and paper products. We continue to invest in exploring new innovative uses for our products, such as our specialty pulps, which are used for non-absorbent end uses including textiles, filtration, construction material, paints and coatings, reinforced plastics and more. Our products are made in the United States and Canada and are sold around the world. International Paper facilities have annual dried pulp capacity of about 3 million metric tons.

BUSINESS SEGMENT RESULTS

The following tables present net sales and operating profit (loss) which is the Company's measure of segment profitability.

INDUSTRIAL PACKAGING

Demand for Industrial Packaging products is closely correlated with non-durable industrial goods production, as well as with demand for e-commerce, processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major factors affecting the profitability of Industrial Packaging are raw material and energy costs, freight costs, mill outage costs, manufacturing efficiency and product mix.

Industrial Packaging net sales for 2022 increased 7% to $17.5 billion compared with $16.3 billion in 2021. Operating profits in 2022 were 6% higher than in 2021. Comparing 2022 with 2021, benefits from higher average sales price net of an unfavorable mix ($1.6 billion) were offset by lower sales volumes ($168 million), higher operating costs ($400 million), higher input costs ($882 million) and higher maintenance outage costs ($59 million).

(a) Includes intra-segment sales of $132 million for 2022 and $126 million for 2021.

North American Industrial Packaging's average sales margins were higher reflecting higher prices for both containerboard and corrugated boxes. Sales volumes decreased in 2022 compared with 2021 for corrugated boxes across our segments driven by the macroeconomic environment reflecting lower consumer spending on goods and retailer inventory destocking. Containerboard sales volumes also decreased. Total maintenance and economic downtime was about 956,000 short tons higher in 2022 compared with 2021, primarily due to economic downtime. Operating and distribution costs increased, primarily due to inflation on materials and services and supply chain and labor constraints. Planned maintenance downtime costs were $58 million higher in 2022 than in 2021. Input costs were significantly higher, driven by higher energy, wood and chemical costs.

Looking ahead to the first quarter of 2023, compared with the fourth quarter of 2022, sales volumes for corrugated boxes and containerboard are expected to increase reflecting four additional shipping days partially offset by the normal season decline. Average sales margins are expected to be lower. Operating costs are expected to increase. Planned maintenance downtime costs are expected to be $95 million higher. Input costs are expected to be lower primarily for recovered fiber and energy.

EMEA Industrial Packaging's average sales margins were higher in the Eurozone driven by higher average sales price. Average sales margins in Morocco were lower reflecting the impact of an unfavorable product mix. Sales volumes in 2022 were lower than in 2021 driven by the sale of our EMEA Packaging business in Turkey in May 2021. Operating costs were higher driven by inflation on materials and services. Planned maintenance outage costs were higher in 2022 compared with 2021. Input costs were significantly higher, driven by unprecedented energy costs.

Entering the first quarter of 2023, compared with the fourth quarter of 2022, sales volumes are expected to be higher driven by seasonality in Morocco. Average sales margins are expected to be higher, reflecting lower containerboard costs. Operating costs are expected to be higher. Planned maintenance outage costs are expected to be $4 million lower due to no planned outages in the first quarter. Other input costs are expected to be stable.

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GLOBAL CELLULOSE FIBERS

Demand for Cellulose Fibers products is closely correlated with changes in demand for absorbent hygiene products, primarily driven by the demographics and income growth in various geographic regions. It is further affected by changes in currency rates that can benefit or hurt producers in different geographic regions. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs, and freight costs.

Global Cellulose Fibers net sales for 2022 increased 18% to $3.2 billion, compared with $2.7 billion in 2021. Operating profits in 2022 improved significantly compared to 2021. Comparing 2022 with 2021, benefits from higher average sales price, a favorable mix and sales volumes ($552 million) were partially offset by higher operating costs ($257 million), higher input costs ($175 million) and higher maintenance outage costs ($11 million).

Sales volumes in 2022 compared with 2021 were lower reflecting the challenging supply chain environment. Total maintenance and economic downtime was about 13,000 short tons higher in 2022 compared with 2021, primarily due to economic downtime. Average sales margins were higher, reflecting higher average fluff and market pulp prices. Operating costs increased, driven by inflation on materials and services and supply chain related mill slowbacks and downtime. Distribution costs were significantly higher driven by continuing global supply chain disruptions. Planned maintenance outage costs were $11 million higher in 2022. Input costs were significantly higher, driven by chemicals, wood and energy.

Entering the first quarter of 2023, compared with the fourth quarter of 2022, sales volumes are expected to be lower reflecting seasonally lower demand and customer inventory destocking in response to increased supply chain velocity. Average sales margins are expected to improve. Operating costs are expected to be higher. Planned maintenance outage costs are expected to be $13 million higher than in the fourth quarter of 2022. Input costs are expected to be lower, primarily for energy.

EQUITY EARNINGS, NET OF TAXES - ILIM

On January 24, 2023, the Company announced it had reached an agreement to sell its equity investment in Ilim and also received from the same purchasers an

indication of interest to purchase its equity investment in Ilim Group. This transaction is discussed further in Note 11 - Equity Method Investments on pages 66 through 68 of Item 8. Financial Statements and Supplementary Data.

All current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes in the consolidated statement of operations. The Company recorded equity earnings, net of taxes, related to Ilim of $296 million in 2022, compared with earnings of $311 million in 2021.

Higher sales volumes and better sales margins in 2022 were more than offset by higher input costs, shipping costs and repair expenses. Sales volumes for the joint venture increased by 5% in 2022, primarily for softwood pulp and containerboard shipments to China, partially offset by lower shipments of softwood pulp and containerboard to other export markets. Average sales margins were significantly higher for sales of softwood pulp and hardwood pulp reflecting higher average sales prices in all markets. Average sales margins for shipments of containerboard declined reflecting lower average sales prices in all markets. Input costs were higher, primarily for wood, fuel and chemicals. Distribution costs were negatively impacted by higher transportation tariffs and other inflationary pressures. Maintenance and repair expenses were higher due in part to repairs to recovery boiler No. 2 at the Ust-Ilimsk mill in the fourth quarter of 2022. The Company received cash dividends from the joint venture of $204 million in 2022 and $154 million in 2021.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

A major factor in International Paper’s liquidity and capital resource planning is its generation of operating cash flow, which is highly sensitive to changes in the pricing and demand for our major products. While changes in key operating cash costs, such as raw material, energy, mill outage and distribution, do have an effect on operating cash generation, we believe that our focus on commercial and operational excellence, as well as our ability to tightly manage costs and working capital has improved our cash flow generation over an operating cycle.

Use of cash during 2022 was primarily focused on working capital requirements, capital spending and returning cash to shareholders through dividends and share repurchases under the Company's share repurchase program.

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CASH PROVIDED BY OPERATING ACTIVITIES

Cash provided by operations, including discontinued operations, totaled $2.2 billion in 2022, compared with $2.0 billion for 2021. Cash used by working capital components (accounts receivable, contract assets and inventory less accounts payable and accrued liabilities, interest payable and other) totaled $145 million in 2022, compared with cash used by working capital components of $426 million in 2021. Cash dividends received from equity investments were $204 million in 2022, compared with $159 million in 2021.

INVESTMENT ACTIVITIES

Including discontinued operations, investment activities in 2022 decreased from 2021, as 2021 included proceeds from the sale of the Kwidzyn, Poland mill and the sale of our ownership interest in Olmuksan International Paper for $827 million, net of cash divested, proceeds from the monetization of our investment in Graphic Packaging International Partners, LLC (GPIP) for $908 million and proceeds of $4.85 billion from the settlement of the 2015 Financing Entities Timber Notes (see Note 15 Variable Interest Entities on pages 75 and 76 of Item 8. Financial Statements and Supplementary Data). Capital spending was $931 million in 2022, or 90% of depreciation and amortization, compared with $549 million in 2021, or 45% of depreciation and amortization. Capital spending as a percentage of depreciation and amortization was 56% for Global Cellulose Fibers and 97% for Industrial Packaging in 2022.

The following table shows capital spending by business segment for the years ended December 31, 2022 and 2021, excluding amounts related to discontinued operations of $69 million in 2021:

Capital spending in 2023 is expected to be approximately $1.0 billion to $1.2 billion, or 91% to 109% of depreciation and amortization.

Acquisitions

See Note 7 Acquisitions on page 62 of Item 8. Financial Statements and Supplementary Data for a discussion of the Company's acquisitions.

FINANCING ACTIVITIES

Financing activities during 2022 included debt issuances of $1.0 billion and reductions of $1.0 billion. Including discontinued operations, financing activities during 2021 included debt issuances of $1.5 billion and reductions of $2.5 billion for a net decrease of $1.0 billion.

Amounts related to early debt extinguishment during the years ended December 31, 2022 and 2021 were as follows:

(a)Reductions related to notes with interest rates ranging from 3.00% to 8.70% with original maturities from 2023 to 2048 for the years ended December 31, 2022 and 2021.

(b)Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations.

The Company's early debt reductions in 2022 included debt tenders of $498 million with interest rates ranging from 6.40% to 8.70% and maturity dates ranging from 2023 to 2039. In addition, during 2022, the Company had $5 million in open market repurchases related to debt with interest rates ranging from 4.35% to 4.40% and maturity dates ranging from 2047 to 2048. In addition to the early debt reductions, the Company had debt reductions of $514 million in 2022 related primarily to capital leases, debt maturities, and international debt.

In January 2023, the Company entered into a variable term loan agreement providing for a $600 million term loan which was fully drawn on the date of such loan agreement and matures in 2028. The $600 million debt was issued following the repayment of $410 million of commercial paper earlier in 2023 and will also be used to repay debt maturing later in 2023 and general corporate purposes.

Other financing activities during 2022 included the net issuance of approximately 1.6 million shares of treasury stock. Repurchases of common stock and payments of restricted stock withholding taxes totaled $1.3 billion, including $1.3 billion related to shares repurchased under the Company's share repurchase program. The Company has repurchased 114.4 million shares at an average price of $46.66, for a total of approximately $5.3 billion, since the repurchase program began in September 2013 through December 31, 2022. The Company paid cash dividends totaling $673 million during 2022.

Other financing activities during 2021 included the net issuance of approximately 1.9 million shares of

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treasury stock. Repurchases of common stock and payments of restricted stock withholding taxes totaled $838 million, including $810.9 million related to shares repurchased under the Company's share repurchase program. The Company paid cash dividends totaling $780 million during 2021.

Interest Rate Swaps

Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk, International Paper utilizes interest rate swaps to change the mix of fixed and variable rate debt. During 2020, International Paper terminated its interest rate swaps with a notional amount of $700 million and maturities ranging from 2024 to 2026 with an approximate fair value of $85 million. Subsequent to the termination of the interest rate swaps, the fair value basis adjustment is amortized to earnings as interest income over the same period as a debt premium on the previously hedged debt. The Company had no outstanding interest rate swaps for the years ended December 31, 2022 and 2021 (see Note 17 Derivatives and Hedging Activities on pages 78 through 81 of Item 8. Financial Statements and Supplementary Data).

Variable Interest Entities

Information concerning variable interest entities is set forth in Note 15 Variable Interest Entities on pages 75 and 76 of Item 8. Financial Statements and Supplementary Data. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 when the installment notes and third-party loans were extended. The restructured variable interest entities held installment notes of $4.8 billion and third-party loans of $4.2 billion which both matured in August 2021. We settled the third-party loans at their maturity with the proceeds from the installment notes. This resulted in cash proceeds of approximately $630 million representing our equity in the variable interest entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021. On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the previously disclosed timber monetization restructuring tax matter. Under this agreement, the Company will fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest will also be charged upon closing of the audit. The amount of interest expense recognized through December 31, 2022 is $58 million. As of December 31, 2022, $89 million in U.S.

federal income taxes and $28 million in interest expense have been paid as a result of the settlement agreement. The remaining $163 million U.S. federal income tax liability and $30 million accrued interest liability are recorded as current liabilities in the balance sheet. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was recognized as a one-time tax benefit in the third quarter of 2022.

LIQUIDITY AND CAPITAL RESOURCES OUTLOOK FOR 2023

We expect another year of solid cash generation in 2023. Furthermore, we intend to continue to make choices for the use of cash that are consistent with our capital allocation framework to drive long-term value creation. These include maintaining a strong balance sheet and investment grade credit rating, returning meaningful cash to shareholders through dividends and share repurchases and making organic investments to maintain our world-class system and strengthen our businesses.

On October 11, 2022, our Board of Directors approved an additional $1.5 billion under our share repurchase program. This program does not have an expiration date and has approximately $3.2 billion aggregate amount of shares of common stock remaining authorized for purchase as of December 31, 2022. We may continue to repurchase shares under such authorization in open market transactions (including block trades), privately negotiated transactions or otherwise, subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. In addition, we pay regular quarterly cash dividends and expect to continue to pay regular quarterly cash dividends in the foreseeable future. Each quarterly dividend is subject to review and approval by our Board of Directors.

Capital Expenditures and Long-Term Debt

Capital spending for 2023 is planned at approximately $1.0 billion to $1.2 billion, or about 91% to 109% of depreciation and amortization.

At December 31, 2022, International Paper’s credit agreements totaled $2.0 billion, which is comprised of the $1.5 billion contractually committed bank credit agreement and up to $500 million under the receivables securitization program. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. At December 31,

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2022, the Company had no borrowings outstanding under the $1.5 billion credit agreement or the $500 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed on pages 76 through 78 in Note 16 - Debt and Lines of Credit of Item 8. Financial Statements and Supplementary Data, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at December 31, 2022 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.

Under the terms of the Company's commercial paper program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. As of December 31, 2022, the Company had $410 million outstanding under the program with remaining capacity of $590 million. As of December 31, 2022, the remaining credit agreement capacity was $1.1 billion.

International Paper expects to be able to meet projected capital expenditures, service existing debt, meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months and for the foreseeable future thereafter with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and maintain appropriate levels of liquidity to meet our needs while managing balance sheet debt and interest expense, and we have repurchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt (including through open market purchases, privately negotiated transactions or otherwise) to the extent consistent with this capital structure planning. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors. During 2020, management took various actions to further strengthen the Company’s liquidity position in response to the COVID-19 pandemic. This included the Company deferring the payment of our payroll taxes as allowed under CARES Act. The CARES Act allows for the deferral of the payment of the employer portion of Social Security taxes accrued between March 27,

2020 and December 31, 2020. Under the CARES Act 50% of the deferred payroll taxes was paid in 2021 and the remainder was paid in 2022. We believe that our credit agreements and commercial paper program provide us with sufficient liquidity to operate in the current negative macroeconomic environment; however, an extended period of economic disruption could impact our access to additional sources of liquidity.

Maintaining an investment grade credit rating is an important element of International Paper’s financing strategy. At December 31, 2022, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively.

Contractual obligations for future payments under existing debt and lease commitments and purchase obligations at December 31, 2022, were as follows:

(a)Includes financing lease obligations.

(b)Includes $4.0 billion relating to fiber supply agreements.

(c)Not included in the above table due to the uncertainty of the amount and timing of the payment are unrecognized tax benefits of approximately $169 million. Also not included in the above table is $95 million of Deemed Repatriation Transition Tax associated with the 2017 Tax Cuts and Jobs Act which will be settled from 2023 - 2026. Additionally, the deferred tax liability of $485 million related to the Temple-Inland timber monetization is not included in the table above. It will be settled with the maturity of the notes in 2027.

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2022, to be permanently reinvested and, accordingly, no U.S. income taxes have been provided thereon (see Note 13 Income Taxes on pages 69 through 71 of Item 8. Financial Statements and Supplementary Data). We do not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Pension Obligations and Funding

At December 31, 2022, the projected benefit obligation for the Company’s U.S. defined benefit plans determined under U.S. GAAP was approximately $29 million lower than the fair value of plan assets, excluding non-U.S. plans. Approximately $297 million of this amount relates to plans that are subject to minimum funding requirements. Under current IRS funding rules, the calculation of minimum

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funding requirements differs from the calculation of the present value of plan benefits (the "projected benefit obligation") for accounting purposes. In December 2008, the Worker, Retiree and Employer Recovery Act of 2008 ("WERA") was passed by the U.S. Congress which provided for pension funding relief and technical corrections. Funding contributions depend on the funding method selected by the Company, and the timing of its implementation, as well as on actual demographic data and the targeted funding level. The Company continually reassesses the amount and timing of any discretionary contributions and elected not to make any voluntary contributions in 2020, 2021 or 2022. At this time, we do not expect to have any required contributions to our plans in 2023, although the Company may elect to make future voluntary contributions. The timing and amount of future contributions, which could be material, will depend on a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require subjective judgments about matters that are inherently uncertain.

Accounting policies whose application has had or is reasonably likely to have a material impact on the reported results of operations and financial position of International Paper, and that can require a significant level of estimation or uncertainty by management that affect their application, include the accounting for contingencies, impairment or disposal of long-lived assets and goodwill, pensions and income taxes. The Company has discussed the selection of critical accounting policies and the effect of significant estimates with the Audit and Finance Committee of the Company’s Board of Directors and with its independent registered public accounting firm.

CONTINGENT LIABILITIES

Accruals for contingent liabilities, including personal injury, product liability, environmental, asbestos and other legal matters, are recorded when it is probable that a liability has been incurred or an asset impaired and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical litigation and settlement experience and recommendations of legal counsel

and, if applicable, other experts. Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. The Company estimated the probable liability associated with these environmental matters to be approximately $243 million ($251 million undiscounted) in the aggregate as of December 31, 2022 and $182 million ($191 million undiscounted) in the aggregate as of December 31, 2021. Liabilities for asbestos-related matters require reviews of recent and historical claims data. The Company's total recorded liability with respect to pending and future asbestos-related claims was $105 million and $103 million, net of estimated insurance recoveries, as of December 31, 2022 and 2021, respectively. The Company utilizes its in-house legal counsel and environmental experts to develop estimates of its legal, environmental and asbestos obligations, supplemented as needed by third-party specialists to analyze its most complex contingent liabilities.

We calculate our workers' compensation reserves based on estimated actuarially calculated development factors. The workers' compensation reserves are reviewed at least quarterly to determine the adequacy of the accruals and related financial statement disclosure. The Company's total recorded workers' compensation reserve was $136 million and $159 million as of December 31, 2022 and 2021, respectively. While we believe that our assumptions are appropriate, the ultimate settlement of workers' compensation reserves may differ significantly from amounts we have accrued in our consolidated financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed by comparing the undiscounted cash flows to carrying value of the assets. If the carrying amount is less than the undiscounted cash flows, the fair value of the assets is compared to the carrying value to determine if they are impaired. An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value.

We perform an annual goodwill impairment as of October 1. Additionally, interim assessments of possible impairments of goodwill are also made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. A goodwill impairment exists when the carrying amount of goodwill exceeds its fair value.

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The amount and timing of goodwill and long-lived asset impairment charges based on these assessments requires the estimation of future cash flows or the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes, operating, raw material, energy and freight costs, various other projected operating economic factors and other intended uses of the assets.

ASU 2011-08, "Intangibles - Goodwill and Other," allows entities testing goodwill for impairment the option of performing a qualitative assessment before performing the quantitative goodwill impairment test. If a qualitative assessment is performed, an entity is not required to perform the quantitative goodwill impairment test unless the entity determines that, based on that qualitative assessment, it is more likely than not that its fair value is less than its carrying value. The Company performed its annual testing of its reporting units for possible goodwill impairments by applying the qualitative assessment to its North America Industrial Packaging reporting unit and the quantitative goodwill impairment test to its EMEA Industrial Packaging reporting unit as of October 1, 2022.

For the current year evaluation, the Company assessed various assumptions, events and circumstances that would have affected the estimated fair value of the North America Industrial Packaging reporting unit under the qualitative assessment and the results of the qualitative assessments indicated that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. Our most recent quantitative goodwill impairment test for our NA IPG reporting unit was performed as part of our 2020 annual goodwill impairment test. That quantitative goodwill impairment test indicated that the fair value of the NA IPG reporting unit exceeded the carrying amount by approximately 100%.

The Company also performed the quantitative goodwill impairment test which included comparing the carrying amount of the EMEA Industrial Packaging reporting unit to its estimated fair value. The estimated fair value of the reporting unit was calculated using a weighted approach based on discounted future cash flows, market multiples and transaction multiples. The determination of fair value using the discounted cash flow approach requires management to make significant estimates and assumptions related to forecasts of future revenues, operating profit margins, and discount rates. The determination of fair value using market multiples and transaction multiples requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiples.

The results of our quantitative goodwill impairment test indicated that the carrying amount exceeded the estimated fair value of the EMEA Industrial Packaging reporting unit and it was determined that all of the goodwill in the reporting unit, totaling $76 million, was impaired. The decline in the fair value of EMEA Industrial Packaging and resulting impairment charge was due to the impacts of certain macroeconomic conditions, including the impacts from inflation and the geopolitical environment to the reporting unit.

Due to the macroeconomic factors noted above, we also performed the long-lived asset impairment test for asset groups that represent the EMEA Industrial Packaging reporting unit prior to the goodwill impairment test and the respective assets groups were determined not to be impaired.

OTHER-THAN-TEMPORARY IMPAIRMENT

The Company evaluates our investment in the Ilim joint venture for other-than-temporary impairment (OTTI) when circumstances indicate the investment may be impaired. When a decline in fair value is deemed to be an OTTI, an impairment is recognized to the extent that the fair value is less than the carrying value of the investment. We consider various factors in determining whether a loss in value of an investment is other than temporary including: the length of time and the extent to which the fair value has been below cost, the financial condition of Ilim joint venture, and our intent and ability to retain the investment for a period of time sufficient to allow for recovery of value. Management makes certain judgments and estimates in its assessment including but not limited to: identifying if circumstances indicate a decline in value is other than temporary, expectations about operations, as well as industry, financial, regulatory and market factors. During the fourth quarter of 2022, the Company received a binding third-party offer to purchase our interest in the Ilim joint venture which was then submitted to our joint venture partners under the preemption provisions of the Ilim shareholders' agreement. The third-party offer resulted in an implied fair value that was less than our investment carrying value. This decrease in fair value below carrying value was not considered to be a temporary decline in value. As such, the Company recorded a $533 million impairment in the fourth quarter of 2022 based on the agreed selling price for our 50% interest. The impairment charge included recognition of $375 million of foreign currency cumulative translation adjustment loss. The timing by which the sale of our investment will be completed is dependent on obtaining required regulatory approvals. In the meantime, we could recognize additional OTTI charges as the carrying value of our investment

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fluctuates relative to the approximate $500 million implied fair value, through additional equity earnings and foreign currency translation.

PENSION BENEFIT OBLIGATIONS

The charges recorded for pension benefit obligations are determined annually in conjunction with International Paper’s consulting actuary, and are dependent upon various assumptions including the expected long-term rate of return on plan assets, discount rates, projected future compensation increases and mortality rates.

The calculations of pension obligations and expenses require decisions about a number of key assumptions that can significantly affect liability and expense amounts, including the expected long-term rate of return on plan assets and the discount rate used to calculate plan liabilities.

Benefit obligations and fair values of plan assets as of December 31, 2022, for International Paper’s pension plan were as follows:

The table below shows the discount rate used by International Paper to calculate U.S. pension obligations for the years shown:

International Paper determines these actuarial assumptions, after consultation with our actuaries, on December 31 of each year or more frequently if required, to calculate liability information as of that date and pension expense for the following year. The expected long-term rate of return on plan assets is based on projected rates of return for current asset classes in the plan’s investment portfolio. The discount rate assumption was determined based on a hypothetical settlement portfolio selected from a universe of high quality corporate bonds.

The weighted average expected long-term rate of return on U.S. pension plan assets used to determine net periodic cost for the year ended December 31, 2022 was 6.00%.

Increasing (decreasing) the expected long-term rate of return on U.S. plan assets by an additional 0.25% would decrease (increase) 2023 pension expense by approximately $20 million, while a (decrease)

increase of 0.25% in the discount rate would (increase) decrease pension expense by approximately $15 million.

Actual rates of return earned on U.S. pension plan assets for each of the last 10 years were:

The 2013 and 2014 returns above represent weighted averages of International Paper and Temple-Inland asset returns. International Paper and Temple-Inland assets were combined in October 2014. The annualized time-weighted rate of return earned on U.S. pension plan assets was 4.7% and 7.1% for the past five and ten years, respectively.

ASC 715, “Compensation – Retirement Benefits,” provides for delayed recognition of actuarial gains and losses, including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the assumed discount rate, differences between the actual and expected return on plan assets, and other assumption changes. These net gains and losses are recognized in pension expense prospectively over a period that approximates the average remaining service period of active employees expected to receive benefits under the plans to the extent that they are not offset by gains and losses in subsequent years.

Net periodic pension plan expenses, calculated for all of International Paper’s plans, were as follows:

The increase in 2022 pension income primarily reflects lower service cost, lower actuarial loss, and lower asset returns, slightly offset by higher interest cost.

Assuming that discount rates, expected long-term returns on plan assets and rates of future compensation increases remain the same as of December 31, 2022, projected future net periodic pension plan expense (income) would be as follows:

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The Company estimates that it will record net pension expense of approximately $102 million for its U.S. defined benefit plans in 2023, compared to income of $116 million in 2022.

The market value of plan assets for International Paper’s U.S. qualified pension plan at December 31, 2022 totaled approximately $8.8 billion, consisting of approximately 16% equity securities, 67% debt securities, 9% real estate funds and 8% other assets. The Company’s funding policy for its qualified pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions and could elect to make voluntary contributions in the future. There were no required contributions to the U.S. qualified plan in 2022. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $29 million for the year ended December 31, 2022.

INCOME TAXES

International Paper records its global tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering technical merits of the position based on specific tax regulations and facts of each matter. Changes to recorded liabilities are only made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases that are relevant to the matter. Accrued interest related to these uncertain tax positions is recorded in our consolidated statement of operations in Interest expense, net.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in assessing the need for and magnitude of appropriate valuation allowances against deferred tax

assets. This assessment is completed by tax jurisdiction and relies on both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. The Company's valuation allowance was $677 million and $708 million at December 31, 2022 and 2021, respectively.

While International Paper believes that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.

LEGAL PROCEEDINGS

Information concerning the Company’s environmental and other legal proceedings is set forth in Note 14 Commitments and Contingent Liabilities on pages 71 through 75 of Item  8. Financial Statements and Supplementary Data. The Company is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

RECENT ACCOUNTING DEVELOPMENTS

See Note 2 Recent Accounting Developments on page 57 of Item 8. Financial Statements and Supplementary Data for a discussion of new accounting pronouncements.

EFFECT OF INFLATION

Inflationary increases in certain input costs, such as energy, wood, recycled fiber, freight and chemical costs, had an adverse impact on the Company’s operating results in 2021 and 2022, but had a minimal impact in 2020. We expect that inflationary pressures will continue to adversely impact our operating results

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in 2023. The effects of inflation have been more significant in recent years due to general inflationary conditions, including labor market conditions, economic activity, consumer behavior, supply shortages and disruptions. Sales prices and volumes are primarily influenced by economic supply and demand factors in specific markets and by exchange rate fluctuations but are also currently being impacted by the current inflationary environment.

FOREIGN CURRENCY EFFECTS

International Paper has operations in a number of countries. Its operations in those countries also export to, and compete with imports from other regions. As such, currency movements can have a number of direct and indirect impacts on the Company’s financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities. Indirect impacts include the change in competitiveness of imports into, and exports out of, the United States (and the impact on local currency pricing of products that are traded internationally). In general, a weaker U.S. dollar and stronger local currency is beneficial to International Paper. The currency that has the most impact is the Euro.

MARKET RISK

We use financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Additionally, financial instruments, including various derivative contracts, are used to hedge exposures to interest rate, commodity and foreign currency risks. We do not use financial instruments for trading purposes. Information related to International Paper’s debt obligations is included in Note 16 Debt and Lines of Credit on pages 76 through 78 of Item 8. Financial Statements and Supplementary Data. A discussion of derivatives and hedging activities is included in Note 17 Derivatives and Hedging Activities on pages 78 through 81 of Item 8. Financial Statements and Supplementary Data.

The fair value of our debt and financial instruments varies due to changes in market interest and foreign currency rates and commodity prices since the inception of the related instruments. We assess this market risk utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and currency rates and commodity prices.

INTEREST RATE RISK

Our exposure to market risk for changes in interest rates relates primarily to short- and long-term debt obligations and investments in marketable securities. We invest in investment-grade securities of financial institutions and money market mutual funds with a minimum rating of AAA and limit exposure to any one issuer or fund. Our investments in marketable securities at December 31, 2022 and 2021 are stated at cost, which approximates market due to their short-term nature. Our interest rate risk exposure related to these investments was not material.

We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions. Derivative instruments, such as interest rate swaps, may be used to execute this strategy. At December 31, 2022 and 2021, the fair value of the net liability of financial instruments with exposure to interest rate risk was approximately $4.3 billion and $6.7 billion, respectively. The potential increase in fair value resulting from a 10% adverse shift in quoted interest rates would have been approximately $328 million and $304 million at December 31, 2022 and 2021, respectively.

COMMODITY PRICE RISK

The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities. Commodity swap or forward purchase contracts may be used to manage risks associated with market fluctuations in energy prices. At December 31, 2022 and 2021, the net fair value of these contracts was $20 million asset and $10 million asset. The potential loss in fair value from a 10% adverse change in quoted commodity prices for these contracts would have been approximately $3 million and $2 million at December 31, 2022 and 2021, respectively.

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FOREIGN CURRENCY RISK

International Paper transacts business in many currencies and is also subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries. Our objective in managing the associated foreign currency risks is to minimize the effect of adverse exchange rate fluctuations on our after-tax cash flows. We address these risks on a limited basis by entering into cross-currency interest rate swaps, or foreign exchange contracts.

At December 31, 2022 and 2021, the net fair value of financial instruments with exposure to foreign currency risk was immaterial. The potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates was also immaterial.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Forward-Looking Statements.”

The following generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussion of historical items in 2019, and year-to-year comparisons between 2020 and 2019, can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 19, 2021, under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

EXECUTIVE SUMMARY

Full-year 2021 net earnings attributable to shareholders were $1.8 billion ($4.47 per diluted share) compared with $482 million ($1.22 per diluted share) for full-year 2020.

During 2021, International Paper grew revenue and earnings while managing through significant operational and supply chain constraints. We serviced strong customer demand in a highly challenging operating environment due to continued uncertainties associated with COVID-19. For much of 2021, we operated with a sub-optimized system, which limited our ability to capture the full opportunity that comes with a strong demand backdrop. We made strong progress on price realization from prior increases to mitigate the impact of substantial cost pressure from inputs and distribution. We generated full-year cash from operations of $2.0 billion and free cash flow of $1.5 billion which included approximately $500 million of tax payments associated with various asset monetization transactions completed in 2021, as well as payment of deferred payroll taxes under

the 2020 CARES Act. In 2021, we further strengthened our balance sheet, reducing debt by $2.5 billion. Additionally, our U.S. qualified pension plan has a 105% funded status with a surplus of $600 million as of December 31, 2021. Lastly, we returned $1.6 billion to shareowners, including about $810 million in share repurchases.

In 2021, we announced the Company's Building a Better IP initiative to drive value creation by streamlining and simplifying the Company, increasing efficiency and reducing costs and accelerating profitable growth. To that end, in 2021 we further focused our portfolio around corrugated packaging with the spin-off of the Printing Papers business as a stand-alone public company, Sylvamo Corporation, and we initiated meaningful actions to materially lower our cost structure and accelerate profitable growth, with a commitment to deliver $350 to $430 million of incremental earnings in 2024.

Comparing our 2021 results to 2020, price and mix improved, with strong price realization across all of our business segments and channels. Mix was also favorable, driven by solid growth in higher-margin, U.S. packaging channels and lower containerboard exports. Volume was essentially flat versus the prior year as significant operational and supply chain constraints limited our ability to capture the full benefits of a solid demand backdrop. This was particularly the case in the fourth quarter 2021, as volume improved less than we anticipated, primarily due to significant Covid-19 omicron variant related labor and supply chain constraints late in the quarter, especially in our U.S. box system. Our North American Industrial Packaging business operated with depleted inventories throughout much of 2021, which increased costs across our system. Across the Company, supply chain operating costs increased significantly versus 2020, representing more than half of the increase in operations and costs in 2021. The second half of 2021 was especially challenging due to slow supply chain velocity and poor logistics reliability, putting additional cost pressure on our manufacturing systems. Maintenance outage costs increased as planned, following deferrals we chose to make in 2020. Input costs rose sharply across most categories, with costs increasing throughout 2021, resulting in significantly elevated input cost levels exiting 2021. Interest expense was substantially lower in 2021, benefiting from significant debt reduction in 2020 and 2021. Although corporate expenses were lower, there was some offset in the fourth quarter 2021 related to expected dis-synergies, following the spin-off of the Printing Papers business. Equity earnings improved on strong performance from our Ilim joint venture, partially offset by reduced earnings from Graphic Packaging following the final

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monetization of our investment in the first half of 2021.

Looking ahead to the first quarter 2022, as compared to the fourth quarter 2021, in our Industrial Packaging business, we expect to realize gains related to the August 2021 published price movement. Volume is expected to be lower in the first quarter 2022 on decreased seasonal demand and the impact of the Covid-19 omicron variant on labor availability and supply chains, although we do expect improvement as the first quarter progresses. Operations and costs are expected to decrease earnings, including additional costs related to the Prattville mill recovery and start-up costs, following the failure of the high-density storage tank in the fourth quarter 2021 Maintenance outage expense is expected to be significantly higher as the first quarter will be our highest outage quarter this year, representing about 40% of total planned outage costs in 2022. Input costs are expected to improve on lower recovered fiber and energy costs. In Global Cellulose fibers we expect our price and mix combined to be stable. We expect volume to decrease moderately due to on-going vessel delays. Operations and costs are expected to increase related to higher seasonal costs and the non-repeat of a favorable LIFO benefit in the fourth quarter 2021. Maintenance outage expense is expected to increase as the first quarter 2022 will also be Global Cellulose Fibers highest maintenance outage quarter in 2022. Input costs are expected to be slightly higher due mostly to higher energy costs. Lastly, equity earnings from the Ilim joint venture are expected to improve.

Looking to full-year 2022, year, we expect a solid demand environment for corrugated packaging and pulp, with demand growth normalizing as we recover from the near-term Covid-19 omicron constraints. We also expect to make good progress on our Building a Better IP initiatives, which will ramp up as the year progresses. We are well positioned to optimize our containerboard mill and corrugated box system following various disruptions in 2021, which will further improve our operating and distributions costs. With respect to our capital allocation, we are targeting capital expenditures of $1.1 billion. The planned increase is driven primarily by investments in our packaging business to build out capabilities and capacity in our box system to drive profitable growth. Additionally, we are committed to a competitive and sustainable dividend with a payout of 40 to 50% of free cash flow, which we will continue to review annually as earnings and cash flow grow. With regard to share repurchases, as of the end of 2021 we had $2.9 billion of available authorizations. We will continue to execute on these authorizations in a manner that balances the investment needs of the business and maximizes value for our shareowners.

On March 11, 2020 the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. During 2021, there continued to be a large number of COVID-19 cases and deaths in the United States and throughout the world, and restrictive measures, including masks and vaccine requirements were implemented or reinstituted by various governmental authorities and private businesses. Economic recovery in the United States and various other regions of the world has continued but may be threatened by the continued adverse effects of COVID-19 and other factors. Most of our manufacturing and converting facilities have remained open and operational during the pandemic and at the current time our manufacturing and converting facilities are generally operational. The health and safety of our employees and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company to maintain the health and safety of our employees including social distancing, site cleaning, contract tracing and other measures as recommended by the CDC and WHO.

The pandemic has not had a material impact on demand for our products. However, all of our operations continue to experience higher supply chain costs and a constrained transportation environment due in part to the impacts of COVID-19. Moreover, due to the competitive labor market, we have experienced and may continue to experience, a shortage of labor for certain positions and increased labor costs.

There continue to be significant uncertainties associated with the COVID-19 pandemic, as detailed under RISKS RELATED TO THE COVID-19 PANDEMIC on page 8 to 19 of Item 1A. Risk Factors. The impacts of the pandemic had an adverse effect on our operations in 2021, and could have a material adverse effect on our financial condition, results of operations and cash flows if public health and/or global economic conditions deteriorate.

Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding discontinued operations, net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and items considered by management to be unusual (net

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special items) from net earnings (loss) attributable to shareholders reported under GAAP. Adjusted Operating Earnings Per Share is calculated by dividing Adjusted Operating Earnings by diluted average shares of common stock outstanding. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results from continuing operations. The Company believes that using this information, along with the most direct comparable GAAP measure, provides for a more complete analysis of the results of operations.

The following are reconciliations of Earnings (loss) attributable to common shareholders to Adjusted operating earnings (loss) attributable to common shareholders on a total and per share basis. Additional detail is provided later in this Form 10-K regarding the net special items referenced in the charts below:

Cash provided by operations, including discontinued operations, totaled $2.0 billion and $3.1 billion for 2021 and 2020, respectively. The Company generated free cash flow of approximately $1.5 billion in 2021 and $2.3 billion in 2020, respectively. Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make

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investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing underlying operational performance, we believe that free cash flow also enables investors to perform meaningful comparisons between past and present periods.

The following are reconciliations of free cash flow to cash provided by operations:

The non-GAAP financial measures presented in this Form 10-K as referenced above have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies utilize identical calculations, the Company’s presentation of non-GAAP measures in this Form 10-K may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company.

RESULTS OF OPERATIONS

Business Segment Operating Profits are used by International Paper’s management to measure the earnings performance of its businesses. Management uses this measure to focus on on-going operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides a more complete analysis of the results of operations by year. Business Segment Operating Profits are defined as earnings (loss) before income taxes and equity earnings, but including the impact of noncontrolling interests, and

excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business Segment Operating Profits is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280.

International Paper operates in two segments: Industrial Packaging and Global Cellulose Fibers. During 2021, as a result of the spin-off of our Printing Papers business along with certain mixed-use coated paperboard and pulp businesses and the associated reclassification of these businesses to Discontinued Operations, we no longer have a Printing Paper segment and the remaining sales and operating profits previously reported in the Printing Papers business have been reclassified for segment reporting for all periods presented.

The following table presents a comparison of net earnings (loss) from continuing operations attributable to International Paper Company to its total Business Segment Operating Profit:

Business Segment Operating Profit in 2021 was $96 million higher than in 2020 as the benefits from higher average sales price realizations and mix ($1.6 billion) and higher sales volumes ($8 million) were partially offset by higher operating costs ($350 million), higher input costs ($981 million) and higher maintenance outage costs ($177 million).

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The principal changes in operating profit by business segment were as follows:

•Industrial Packaging’s operating profit of $1.6 billion was $119 million lower than in 2020 as the benefits of higher average sales price, favorable mix and higher sales volumes were more than offset by higher operating costs, higher input costs and higher maintenance outage costs.

•Global Cellulose Fibers' operating loss improved $215 million to $3 million compared with 2020 as the benefits of higher average sales price, favorable mix and higher sales volumes were more than offset by higher operating costs, higher input costs and higher maintenance outage costs.

LIQUIDITY AND CAPITAL RESOURCES

Including discontinued operations, International Paper generated $2.0 billion of cash flow from operations for the year ended December 31, 2021, compared with $3.1 billion in 2020. Capital spending for 2021 totaled $549 million, or 45% of depreciation and amortization expense. Our liquidity position remains strong, supported by approximately $2.1 billion of credit facilities.

RESULTS OF OPERATIONS

While the operating results for International Paper’s various business segments are driven by a number of business-specific factors, changes in International Paper’s operating results are closely tied to changes in general economic conditions in North America, Europe, Latin America, North Africa and the Middle East.

Factors that impact the demand for our products include industrial non-durable goods production, consumer preferences, consumer spending and movements in currency exchange rates.

Product prices are affected by a variety of factors including general economic trends, inventory levels, currency exchange rate movements and worldwide capacity utilization. In addition to these revenue-related factors, net earnings are impacted by various cost drivers, the more significant of which include changes in raw material costs, principally wood, recovered fiber and chemical costs; energy costs; freight costs; mill outage costs; salary and benefits costs, including pensions; and manufacturing conversion costs.

The following is a discussion of International Paper’s consolidated results of operations for the year ended December 31, 2021, and the major factors affecting these results compared to 2020.

For the year ended December 31, 2021, International Paper reported net sales of $19.4 billion, compared with $17.6 billion in 2020. International net sales (based on the location of the seller and including U.S. exports) totaled $5.2 billion or 27% of total sales in 2021. This compares with international net sales of $4.8 billion in 2020.

Full year 2021 net earnings attributable to International Paper Company totaled $1.8 billion ($4.47 per diluted share), compared with net earnings of $482 million ($1.22 per diluted share) in 2020. Amounts in all periods include the results of discontinued operations.

Earnings from continuing operations attributable to International Paper Company after taxes in 2021 and 2020 were as follows:

(a)Includes $284 million of net special items charges and $151 million of non-operating pension income.

(b)Includes $649 million of net special items charges and $31 million of non-operating pension income.

Compared with 2020, the benefits from higher average sales price and a favorable mix ($1.2 billion), higher sales volumes ($6 million), lower net interest expense ($82 million), and lower tax expense ($69 million) were partially offset by higher operating costs ($262 million), higher input costs ($734 million), higher maintenance outage costs ($133 million) and higher corporate and other costs ($51 million). In addition, 2021 results included higher equity earnings, net of taxes, relating to the Company’s investment in Ilim and other investments, partially offset by lower equity earnings relating to the Company's investment GPIP.

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See Business Segment Results on pages 29 through 31 of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the impact of these factors by segment.

DISCONTINUED OPERATIONS

On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers business along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. On August 6, 2021, the Company completed the sale of its Kwidzyn, Poland mill which included the pulp and paper mill in Kwidzyn and supporting functions. As a result of the Sylvamo Corporation spin-off and sale of Kwidzyn, the Company no longer has a Printing Papers business segment, and all current and historical results have been adjusted to reflect the Kwidzyn and the Printing Papers business and other businesses conveyed to Sylvamo Corporation as discontinued operations. See Note 8 on pages 61 through 63 of Item 8. Financial Statements and Supplementary Data for further discussion.

Discontinued operations include the operating earnings of the businesses noted above. Discontinued operations also includes an after-tax net special items gain of $330 million and charge of $7 million in 2021 and 2020, respectively.

Details of these charges (gains) were as follows:

INCOME TAXES

A net income tax provision from continuing operations of $188 million was recorded for 2021. Excluding a $87 million net tax benefit for other special items and a $49 million tax expense related to non-operating pension income, the operational tax provision was $226 million, or 19% of pre-tax earnings before equity earnings.

A net income tax provision from continuing operations of $176 million was recorded for 2020, including a tax benefit of $23 million related to the settlement of tax audits. Excluding this item, a $70 million net tax benefit for other special items and a $10 million tax expense related to non-operating pension income, the operational tax provision was $259 million, or 25% of pre-tax earnings before equity earnings.

EQUITY EARNINGS, NET OF TAXES

Equity earnings, net of taxes, consisted principally of the Company’s share of earnings from its 50% investment in Ilim of $311 million and $48 million in 2021 and 2020, respectively, and from its ownership interest in GPIP of $4 million in 2021 and its then 15.0% ownership interest at December 31, 2020 in GPIP of $40 million. The Company no longer had an ownership interest in GPIP at December 31, 2021 (see page 31).

INTEREST EXPENSE AND NONCONTROLLING INTEREST

Net corporate interest expense totaled $337 million in 2021 and $446 million in 2020. The decrease in 2021 compared with 2020 was due to lower average outstanding debt.

Net earnings attributable to noncontrolling interests were $2 million in 2021, compared with zero in 2020.

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SPECIAL ITEMS

Pre-tax special items included in continuing operations totaling $371 million and $742 million were recorded in 2021 and 2020, respectively. Details of these charges were as follows:

(a) Includes charges of $9 million recorded in the Industrial Packaging business segment and $5 million recorded in the Global Cellulose Fibers business segment.

(b) Recorded in the Industrial Packaging business segment.

(c) Allocation of income to noncontrolling interest associated with the sale of our EMEA Packaging business in Turkey.

Net losses on sales and impairments of businesses included in special items totaled a pre-tax gain of $7 million and loss of $465 million in 2021 and 2020, respectively. Details of these (gains) losses were as follows:

(a) Includes gains of $5 million recorded in the Industrial Packaging business segment and gains of $1 million recorded in Corporate.

See Note 8 Divestitures and Impairments on pages 61 through 63 of Item 8. Financial Statements and Supplementary Data for further discussion.

International Paper continually evaluates its operations for improvement opportunities targeted to (a) focus our portfolio on our core businesses, (b) realign capacity to operate fewer facilities with the same revenue capability, (c) close high cost, unprofitable facilities, and (d) reduce costs. Additionally, the Company is committed to its capital allocation framework to maintain a strong balance sheet including reducing debt to maximize value creation and maintain our current investment grade credit rating.

During 2021 and 2020, pre-tax restructuring and other charges, net, totaling $509 million and $195 million were recorded. Details of these charges were as follows: